Report calls for wholesale review of inheritance tax reliefs

12 Jun 2019

sailing boats docked at the shore

The UK’s inheritance tax system has come under fire in a report from not-for-profit campaign group Tax Justice, titled In stark relief: How inheritance tax breaks favour the well off.

Published earlier this month the report is critical of Business Property Relief (BPR) and Agricultural Property Relief (APR) schemes that can be used to mitigate against exposure to inheritance tax.

The report, among other recommendations, calls for a review of the fairness and effectiveness of inheritance tax reliefs, with consideration as to whether they should continue, and a cap on the amount of relief available to estates with a value of over £1 million. The report states:

“Agricultural Property Relief reduces inheritance tax on agricultural property at a rate of up to 100%.

“Farmland is an increasingly popular financial investment. In 2017 just 40% of agricultural land was purchased by farmers, down from 60% in 2011, while investors have flocked to buy agricultural land and property.”

The report also highlights “…suspicion that this tax break is driving up the cost of rural property, pricing poorer farmers out of the market”.

Martyn Dobinson, a partner at Saffery Champness and a member of the firm’s Landed Estates Group, comments:

“The Office of Tax Simplification published its first report on this subject last year, with a follow-up report scheduled. The first report focused on the administration and overview of the tax and stated that the reliefs work in a broadly straightforward way, albeit there were some areas where there is confusion and inconsistency. We eagerly anticipate the second report, which will consider reliefs such as APR and BPR in more detail.

“The Tax Justice conclusion, that such reliefs are being widely abused and should be curtailed, could bring far reaching and unintended consequences. For example, without APR and BPR, the assets in question might need to be sold to fund an inheritance tax bill, resulting in productive farming units and estates being broken up; also, that non-farming investors take advantage of such opportunities, resulting in their owning a greater share of the farmland resource.”