The NFU has repeatedly warned that such a change would have a serious impact on many family farms.
Currently, APR (agricultural property relief) allows working farms to be passed from the principal farmer upon their death to the next farming generation, by making such businesses free from inheritance tax as long as they are working farming businesses.
Significant changes to, or the abolition of, APR would have a disproportionate effect on small family farms which are the backbone of British agriculture.
The BBC has reported that the government is considering raising revenue by revising inheritance tax rules, which currently applies at 40% on estates above a £325,000 threshold and brings in around £7 billion annually, affecting approximately 4% of estates. Among the changes being explored are adjustments to existing exemptions, including APR, according to the BBC report.
NFU analysis of APR suggests that scrapping it would only save the Treasury £120 million per year, while the negative impact on farming would be much larger.
Impact on farming businesses
NFU President Tom Bradshaw recently wrote to Chancellor Rachel Reeves about the vital need to protect family farms and tenants through APR. Tom also made the case to the Chancellor at the Labour party conference in Liverpool this year.
Responding to reports that the government could be looking at making changes to inheritance tax as part of its Autumn Budget announcement, Tom said: “NFU members keep seeing these alarming media reports and they are understandably worried and upset.
“Major APR changes would put at risk many farming families’ succession plans and consequently undermine the government’s own ambitions for food and environmental security.
“Farming is often a generational business, and APR is what makes it possible for small family farms to pass from one generation to another.”
NFU President Tom Bradshaw
“I’m also very concerned that changes would damage the tenanted sector, as landowners will have much less incentive to let land to agricultural tenants. In short, this ‘family farm tax’, which is what removing APR amounts to, could be too much for some farming businesses which are already struggling with numerous challenges.
“Farming is often a generational business, and APR is what makes it possible for small family farms to pass from one generation to another.
“We’ve given the Treasury the details and evidence for our concerns and we stand ready to meet ministers and officials again, at any time, to reinforce the point that a family farm tax could push many small family farming businesses over the edge.”
In the past, the NFU has been reassured to hear the new Defra Secretary confirm the party had no plans to change inheritance tax, including APR, after the NFU briefed Mr Reed’s team.
“The return on capital for farming can be very low and would be insufficient to pay a 40% inheritance tax charge. This would effectively mean using up all of the profits and remove any ability to invest in the business,” added NFU head of tax Michael Parker.
No ‘mere tax reliefs’
The NFU also helped secure a debate in parliament this week on the issue.
Harriet Cross, Conservative MP for Gordan and Buchan said that APR and BPR (business property relief) “play a crucial role in securing the longevity of farming and family businesses”.
“APR and BPR are not mere tax reliefs – they are the foundation of a thriving, sustainable and entrepreneurial United Kingdom,” Ms Cross added. “They support our farmers and family businesses, pillars of our communities that have been there for generations.”
Conservative MP for Central Suffolk and North Ipswich Patrick Spencer warned removing APR and BPR “could push many [family farms] over the edge”.
“What a loss that would be to our economy, to our communities and to the many families who have owned, farmed and maintained their land for generations, and who will continue to do so for generations to come.”
The Exchequer Secretary to the Treasury, James Murray MP (Labour, Ealing North) noted that stakeholders have argued strongly against the reliefs being abolished but added that other organisations are in favour.
