Confusion has broken out over how many farms will be affected by Rachel Reeves’ controversial changes to inheritance tax after new figures showed her claims of one in four may be wide of the mark.
Figures produced by the Department for Environment, Food and Rural Affairs (Defra) have been interpreted by farmers’ groups to suggest that up to two thirds (66 per cent) of farms could be hit by the tax grab which critics claim will destroy Britain’s family farms.
This is in stark contrast to the 28 per cent that the Treasury had claimed with officials in the two departments understood to be at loggerheads over the chancellor’s shock announcement. But a source close to environment secretary Steve Reed has blamed the National Farmers Union (NFU) for confusing the issue with incorrect analysis of Defra figures.
Ms Reeves imposed inheritance tax on farm land for the first time since 1992 with 20 per cent rate being paid for all land valued at £1 million or more, although couples can make use of a pooled allowance of £2m plus personal allowances of up to £500,000 each.
Defra figures show that the average farm is worth £2.2 million and 66 per cent are worth £1 million or more.
One organisation involved in the mass protest against the tax raid on 19 November has already called for an investigation into the figures.
Countryside Alliance external affairs director Mo Metcalf-Fisher said: “This is a staggering admission by the Minister and it demonstrates that to the Treasury, the countryside and farmers are just an afterthought. With the Treasury figures being so wildly different to Defra’s, an urgent investigation is vital. As it stands, the Treasury could be open to the accusation of misleading the public.
Getting this right in the first instance, as well as carrying out meaningful consultation with the farming sector before Rachel Reeves announced the hated family farm tax at the dispatch box, would have avoided the unnecessary pain that’s been inflicted on so many farmers and their families”
The Treasury figures are said to be out of date and based on how many claim agricultural property relief (APR) but have excluded many others which claim business property relief (BPR).
On Monday NFU president Tom Bradshaw told journalists: “They do not understand the immediate impacts this having to intergenerational farms. Some very, very concerned successful businesses have a parent involved who is in their 80s but the person running the farm is in their 50s. The assets are still in the ownership of the older family member.
“We have seen some in ill health who will not live seven years to utilise the gifting rules. It is unbelievable the pressure they are putting on the industry. To make this change now, to rip the rug out from under the farming industry, I don’t see how they can justify it.”
A source close to environment secretary Steve Reed disputed the Defra figures which have been seized on by the NFU saying that the reliefs meant that farms needed to be worth £3 million rather than £1 million to fall foul of the changes.
They said: “We don’t recognise the NFU figures – they are not based on Defra analysis. Our figures, which are based on actual claims for Agricultural Property Relief, show that 73 per cent of claims are expected to be unaffected by the changes.
“Depending on people’s individual circumstances, up to £3 million can be passed on free of inheritance tax. Anything beyond that will be taxed at 20 per cent, rather than the usual 40% normal rate of inheritance tax. This tax can be paid in instalments over 10 years, rather than immediately.
“By way of example, two farmers who jointly own a farm will be able to pass on land and property valued up to £3 million to a child or grandchild tax-free. That’s £1 million, where a pair can combine their £500,000 tax-free threshold and then on top of that, an additional £1 million tax-free threshold each for agricultural property inheritance. So in this case a farm worth £3 million could be passed on tax-free.
“And if transfers to individuals are made more than 7 years before death, those will continue to fall outside the scope of inheritance tax in the normal way.”
A Defra spokesperson added: “With public services crumbling and a £22 billion fiscal hole inherited from the previous government, we have made the difficult decision to reform agricultural property relief in a balanced and fair way.
“All ministers support the policy and it will not change.”
The row spilled over into the Commons during Defra questions.
Shadow environment minister Dr Neil Hudson said the Government’s “ill-judged, and heartless family farm tax” will put food security in “jeopardy”, adding: “No farms, no food. No farmers, no food. Will the Government please now admit they have got this catastrophically wrong, do the right thing, reverse this farm tax, and protect our country’s food security?”
But farming minister Daniel Zeichner replied: “It’s very important that we treat this subject carefully, that we look at the facts, and listen to people who know about it.”
Shadow environment minister Robbie Moore said: “The figures repeatedly being regurgitated by the Government only consider past claimants of agricultural property relief, not combined with business property relief, which is just as important. And why? Because the Treasury doesn’t have the data.
“We need need comprehensive detail on this policy to properly understand the impacts of his family farm tax. So, I ask for a further time in this House, will he release an impact assessment, yes or no?”
Mr Zeichner replied: “We seem to be having this discussion endlessly don’t we? And the figures are absolutely clear on agricultural property relief, and the reason I’ve kept asking for people to look at the detail, is because when you look at the detail what we will find - and listen to the tax experts, listen to the people who have actually looked at it in detail - fewer than 500 will be affected.
“That is the reassuring message that his side should be conveying to British farmers as well.”
