A potential move to simplify inheritance tax could sweep away special reliefs for farmers and leave them with tax bills they would struggle to pay, a specialist agricultural lawyer has warned.
“A group of MPs from all parties has recommended that the inheritance tax rate should be dropped from 40 per cent to 10 per cent and that reliefs are abolished to simplify the system,” said Stephen Lawson, a partner of FDR Law in Frodsham, Cheshire.
“That would include agricultural property relief which allows farms to be handed over intact from generation to generation without incurring tax.
"Many farms, which do not make large sums of money, are worth more than £1 million and so a son or daughter could be faced with a tax bill of tens of thousands of pounds on the death of the farming parent.”
John Stevenson, the Conservative MP for largely rural constituency of Carlisle, is the chairman of the All Party Parliamentary Group (APPG) on Inheritance Tax and Intergenerational Fairness who published the report.
He said:“Our bold proposals for reform seek to address this unfairness by simplifying the system and ensuring that the higher value estates that currently take advantage of so many reliefs and exemptions actually pay some IHT.”
Mr Lawson added: “It would be ironic that in an attempt to be more fair, smaller farms were penalised with tax bills that could force them to sell farms that have been in their families for generations.”
Peter Harker a partner at accountants Saffery Champness said: “From a rural/farming perspective loss of the ability for intergenerational transfer of agricultural land, property and other business assets without penalty would be a hammer blow in terms of succession.
"The only concession in the APPG proposals with regard to business and agricultural property relief is that there would be an option to pay tax on death or lifetime transfers in 10-year instalments, or until an earlier sale if assets comprise land and business.”
The Treasury said it constantly reviews the tax system and will consider the APPG’s findings.
It is thought that the Conservative Government is keen to simplify and reduce inheritance tax rates but is conscious it raises more than £5 billion a year.