Parliament’s Environment, Food and Rural Affairs Committee has urged the government to pause its inheritance tax (IHT) reforms for agricultural businesses, bringing the controversial plans under renewed scrutiny.
The cross-party committee of MPs has published a report calling on the government to delay plans to bring down the threshold for Agricultural Property Relief (APR) and Business Property Relief (BPR) by 12 months. The group say a delay would “allow for better formulation of tax policy and provide the Government with an opportunity to convey a positive long-term vision for farming.”
The recommendation is to implement the proposals from April 2027 rather than April 2026. But a call of this nature from an influential group of MPs, including senior Labour backbenchers, is bound to stoke hopes that the government could yet be persuaded to abolish the plans altogether.
Lack of transparency over clawback alternative
This latest twist in the saga came as news emerged that the government has refused Freedom of Information requests from both the National Farmers’ Union (NFU) and the Country Land and Business Association (CLA) asking the Treasury to release details of its modelling of a proposed alternative to the planned reforms.
The so-called ‘clawback’ option suggests making the full 40% IHT rate payable on inherited agricultural and business property if it is sold within seven years, rather than automatically applying a reduced 50% rate on inherited assets over the new £1m valuation cap.
The Treasury dismissed these proposals, claiming they would raise significantly less revenue for the Exchequer. Industry bodies including the NFU have accused the government of a lack of transparency over its refusal to share the modelling that led to this conclusion.
The plans to limit APR and BPR relief have drawn widespread criticism from farmers, agricultural businesses and trade bodies since they were announced in the Autumn Budget. As things stand, from April 2026, family farms will get 100% relief from IHT up to £1 million in value, and everything after that will be taxed at 20%.
As critics point out, given the land value of most working farms, even relatively modest businesses are likely to face significant tax bills despite the reduced rate. Many next generation farmers are likely to have little option but sell off property assets in order to pay their tax bill, defeating one of the stated purposes of the reforms, to stop working farm land ending up in the hands of rich investors. It is also likely to act as a big deterrent to younger people taking on their family farms when older relatives pass away.
Unfortunately, the government has so far shown an unwillingness to engage with critics to its plans or to properly consider alternative measures. A pause would be a sensible step to allow for proper consultation to be carried out. While the government has made plain the need to increase tax revenue to bolster the public finances, it seems clear that these proposals place too heavy a burden on farming families, and time should be made to develop sensible alternatives.
If you are concerned about the potential impact of the APR and BPR reforms on your farming business, Xeinadin can help. With a dedicated team of agricultural accounting specialists up and down the country, as well as a wealth of expertise in personal tax and estate planning, we are well placed to talk through the options available to you.
Give us a call today to find out more.
