Finance

Tax experts warn 75k farmers to be hit by Reeves's raid as doubts cast on Labour's figures


Tax experts have cast doubt over Treasury figures that around 500 estates will be affected each year by Rachel Reeves’s inheritance tax changes.

The Central Association of Agricultural Valuers (CAAV) has calculated that up to 75,000 individual farm business owners are “likely to be affected” over the coming generation.

Speaking at the Environment Committee on Wednesday, David Sturrock, senior research economist at the Institute for Fiscal Studies think tank said the figures are on a “no behavioural change basis”.

“We might expect that of these estates who, if they did nothing, would pay higher tax. Some will change the ownership structure or make gifts in a way that should mean that that number would be lower.

“Of course, there’s a lot of uncertainty from that behavioural change but also the economic factors that drive forecasts, like land prices and so there’s some certainty in both directions on those figures.”

He added: “There’s a lot of different numbers that have been going around of course.

“The figures that come from Defra are about the value of farm businesses. In order to say something about how many would be potentially taxable, we need to know about their ownership structure but that’s something we don’t have the data on together with the value of those farms”.

On who will be affected by the tax changes, Stuart Maggs, head of tax and partner at Howes Percival law firm, told the committee: “The real issue is, what does affected mean?

“What the Treasury have done is they’ve said: ‘If we picked up this hypothetical set of rules that we’ve come up with and applied it to 2021 how many people would have paid some tax in those circumstances? That will never happen in the real world.”

He said the Government should be looking at carrying out a forecast like that done by the Central Association of Agricultural Valuers, which focuses on “how many people are waking up this morning thinking: Am I going to lose my farm if my father dies?’

“And that’s much more likely to be about 70-75,000 people.”

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