Adam Hart
Guest Reporter
A leading tax expert has revealed the true cruelty of Reeves’ inheritance tax raid on British farmers in an impassioned speech to the Defra select committee.
Stuart Maggs, head of tax and partner at the respected law firm Howes Percival, revealed that for the last 30 years, the best tax advice for farmers has been to retain the farm until death.
This means thousands of farms across Britain are still in the name of an elderly parent, many of whom have spent their lives working long hours in all conditions to feed the nation.
But in one stroke, Chancellor Reeves upended 30 years of advice by slapping previously exempt farmers with 20 per cent death duties on assets over £1million, leaving scores of elderly farmers terrified of dying and saddling their children with huge tax bills.
The move was a particularly bitter blow as there was ‘absolutely zero consultation’ or warning from the government until Reeves announced her budget, leaving no time for planning.
Maggs said: “Over the last 30 years, the best advice has been retain the farm until the day you die.
“This means that we've got a lot of 70, 80 and even 90-year-olds who are still working farmers, who are still going out on the farm, tending to the livestock in the morning.
“Even if you've got the next generation involved, to bring the average down, the person who owns the farm has naturally been at the elder end of the spectrum.
“So this change coming in now has really hit home to farmers, because they're in a situation where there's nothing that they can do about it.
“They can't give away and survive seven years.” The seven-year gifting rule allows someone to avoid inheritance tax by transferring assets over seven years, but the transferrer has to live for seven years.
“Even if they could give away, it wouldn't be effective. There are rules called ‘gifts with reservation.’
“And that means that if you give something away, you can’t continue to enjoy a benefit from it, i.e. live on the farm and earn money from it.”
LATEST FROM MEMBERSHIP:
Maggs then used the example of an elderly widow who had retained the farm (as per tax advice for last thirty years) but because of ‘gifts with reservation’, could not transfer it to her children.
“Mum can't give away the farm without being taxed as if she still owned it at the date of her death. So she can't plan,” explained Maggs.
“Which means this charge is going to be a burden. And with agricultural estates getting a rate of return of about half a per cent to 1 per cent, it simply means this is going to be unaffordable.
“Farms are going to have to sell land or sell up. And it's going to happen a lot.”
Labour promised to not meddle with farmers’ inheritance tax before the election, immediately reneging on that pledge citing the ‘black hole’.
In response, two huge tractor protests have gridlocked central London, but the Government is refusing to budge arguing it is a ‘fair and balanced way’ to plug the £22billion black hole.
A Defra spokesperson said: “Our commitment to farmers remains steadfast – we have committed £5 billion to the farming budget over two years, including more money than ever for sustainable food production, and we are developing a 25-year farming roadmap, focusing on how to make the sector more profitable in the decades to come.
“Our reform to Agricultural and Business Property Relief will impact around 500 estates a year.
“For these estates, inheritance tax will be at half the rate paid by others, with 10 years to pay the liability back interest free. This is a fair and balanced approach which fixes the public services we all rely on."
Find Out More...
Stuart Maggs, head of tax and partner at the respected law firm Howes Percival, revealed that for the last 30 years, the best tax advice for farmers has been to retain the farm until death.
This means thousands of farms across Britain are still in the name of an elderly parent, many of whom have spent their lives working long hours in all conditions to feed the nation.
But in one stroke, Chancellor Reeves upended 30 years of advice by slapping previously exempt farmers with 20 per cent death duties on assets over £1million, leaving scores of elderly farmers terrified of dying and saddling their children with huge tax bills.
The move was a particularly bitter blow as there was ‘absolutely zero consultation’ or warning from the government until Reeves announced her budget, leaving no time for planning.
Maggs said: “Over the last 30 years, the best advice has been retain the farm until the day you die.
“This means that we've got a lot of 70, 80 and even 90-year-olds who are still working farmers, who are still going out on the farm, tending to the livestock in the morning.
“Even if you've got the next generation involved, to bring the average down, the person who owns the farm has naturally been at the elder end of the spectrum.
“So this change coming in now has really hit home to farmers, because they're in a situation where there's nothing that they can do about it.
“They can't give away and survive seven years.” The seven-year gifting rule allows someone to avoid inheritance tax by transferring assets over seven years, but the transferrer has to live for seven years.
“Even if they could give away, it wouldn't be effective. There are rules called ‘gifts with reservation.’
“And that means that if you give something away, you can’t continue to enjoy a benefit from it, i.e. live on the farm and earn money from it.”
LATEST FROM MEMBERSHIP:
- How Syria will trigger disaster for Europe and the world - Kwasi Kwarteng
- The real cause of the migrant crisis is neither migrants nor smuggling gangs - William Clouston
- Assad's Exit - Out with the Butcher - in with dangerous chaos - Frederick Chedham
Maggs then used the example of an elderly widow who had retained the farm (as per tax advice for last thirty years) but because of ‘gifts with reservation’, could not transfer it to her children.
“Mum can't give away the farm without being taxed as if she still owned it at the date of her death. So she can't plan,” explained Maggs.
“Which means this charge is going to be a burden. And with agricultural estates getting a rate of return of about half a per cent to 1 per cent, it simply means this is going to be unaffordable.
“Farms are going to have to sell land or sell up. And it's going to happen a lot.”
Labour promised to not meddle with farmers’ inheritance tax before the election, immediately reneging on that pledge citing the ‘black hole’.
In response, two huge tractor protests have gridlocked central London, but the Government is refusing to budge arguing it is a ‘fair and balanced way’ to plug the £22billion black hole.
A Defra spokesperson said: “Our commitment to farmers remains steadfast – we have committed £5 billion to the farming budget over two years, including more money than ever for sustainable food production, and we are developing a 25-year farming roadmap, focusing on how to make the sector more profitable in the decades to come.
“Our reform to Agricultural and Business Property Relief will impact around 500 estates a year.
“For these estates, inheritance tax will be at half the rate paid by others, with 10 years to pay the liability back interest free. This is a fair and balanced approach which fixes the public services we all rely on."
Find Out More...