Over the last few days there have been a lot of commentators detailing why they believe that the farmers are wrong and that the Government is right to impose inheritance tax charges on farmers. They argue that farmers should not be treated differently to anybody else that owns an asset such as a house. They appear to miss the big difference that farmland is completely different to other assets.
For example, if you have a parent that’s living in the old family home, generally their offspring will have left home, they’ll have their own house, their own career and an income that is completely independent of the parent. When the parent dies, if there is an inheritance tax liability, the parent’s assets can be sold off and the liability paid to HMRC. The offspring get to take what is left and do with it whatever they like.
If you are the offspring of a farmer and intend to maintain that farm and there is an inheritance tax liability it is extremely unlikely that there would be available cash to settle the tax liability. It is also likely that you would be living on that farm and your income would be dependent on it.
Certain commentators glibly suggest that the offspring would just have to sell some of their land to pay the tax bill. Let us suppose someone follows this suggestion and needed to sell 5% of the land to cover the bill. He would have to sell a parcel of land that was useful to somebody else; he couldn’t just carve out a little corner of a field he doesn’t use so he would probably end up having to sell a larger portion of the property at a low rate to be able to generate at least that amount of cash. If he ends up having to sell say 10% of his land to meet this inheritance tax bill that means that his income would drop 10%. It’s as simple as that: the income cannot remain at where it was if he’s selling off part of the asset that is generating that income.
Would the commentators saying that everyone has got to be treated the same be prepared, when they inherit from a parent, to sell part of the parent’s assets to pay a sum to HMRC, not be able to sell the rest and have to take a reduction in their income just because they’ve inherited?
It has also been suggested that the only reason you pay inheritance tax is if you don’t trust your children as you can gift the farm to them and after seven years there is no tax liability. Setting aside farmers have not had to do this until now and do not have seven years now to execute the plan, there is a good reason they might not want to.
As you get older you will pass over more of the farm work to your offspring because he or she is younger and fitter than you. Farm workers are more than 20 times more likely to be killed on the job, according to health and safety figures. If you pass over the farm to your offspring and your offspring gets killed in a farm accident, what happens then? Is there a special clause so you could say you didn’t really mean it, it was only if you died first?
The simplest way to target the people who have put money into farm land as an inheritance tax dodge is just to make it so that a charge becomes due if the land is sold. If it is being passed on to another generation of farmers and is being farmed there should be no tax liability.
Inheriting a farm is quite simply very different from inheriting a house and anyone who cannot see that is incredibly stupid.
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You can’t simply gift an asset to someone and continue to benefit from it, and they don’t. That’s gifting in name only and won’t exempt you from IHT. You’d need to give all the profits to whoever you are gifting it to, and draw a reasonable wage only for the work you did for the business. If you give them the farmhouse but keep living in it you’d need to pay them rent which they would need to pay income tax on.
Preowned assets. Gordon Brown Inteoduced tax on them.
If you believe in IHT then it’s fair enough I think – but I think IHT should be abolished along with most other taxes.
Yup, it’s the size of the state why they need to find taxes for all and sundry. Rupert Lowe from Reform is against IHT. He seems more based than Farage to me.
IHT = grave robbing.
If IHT exists at all, it should only be due if an asset is realised, as in sold to release capital.
This is even more relevant for a farm or other business, such as a builders business, plumbers, electrician, carpentry, retail etc., if its being passed on to heirs and the next generation, to allow the business to continue to operate.
This move appears to have one purpose, to destroy small businesses, especially farms, many of which are already barely viable.
Yup, obviously small business owners and their employees don’t count as “working people”
That is Capital Gains Tax not IHT.
The “profit” in an asset is its realised gain when the asset is liquidated. If it is not liquidated there is no gain no ‘profit’.
The inheritance tax on farms, is a tax on unrealised gains. It is an idiot tax dreamed up by idiots, because in order to pay it some or all of the asset has to be liquidated which means next time there is less to tax – diminishing tax returns.
There is no profit in a farm. The profit comes from its productive output when sold to market, and that output is the result of the labour needed to produce it.
If the parents – having gifted the farm to their children – are invited to live there by their children, what idiot logic concludes they must be charged rent?
If because it is necessary to liquidate part of the asset or borrow money to pay the tax liability, that reduces the productive output of the farm which is detrimental to the farmer, consumers and reduces tax revenue to the Treasury.
Is the IHT payable on just the value of the land and buildings or on the farm business as a going concern, or both?
The “profit” on a farm, if you want to equate it to “profit” quoted for other businesses, would I suppose be the difference between the income and expenses, including a notional wage payable to the farm owners. Perhaps very few farms actually accumulate excess cash…
As I understand it is on the estimated value per acre.
Agricultural land has little value if it is not farmed.
Ah, interesting. So they probably base the tax payable on the value as agricultural land so there is a lot to pay, forcing the estate to sell. But who will buy it? Big firms probably. Lovely! Labour, friend of Big Business.
Not true as these days you can make money from growing solar panels and from planting trees and selling indulgences to offset the sin of living a normal life to those dumb enough. Then there is house building to provide somewhere for all the immigrants to live but as they prefer cities with their own religious/nationality ghettos, it is probably for the ‘white flight’ British people to live.
there are exemptions for Company provided living accommodation (480: Chapter 21) see https://www.gov.uk/guidance/company-provided-living-accommodation-480-chapter-21 where no tax charges for the provision of living accommodation will arise where:
(a) It’s necessary for the proper performance of the employee’s duties that they should reside in the accommodation.
(b) The accommodation is provided for the better performance of the employee’s duties and the employment is one of the kinds for which it’s customary for employers to provide accommodation for the employee.
Of course the employee needs to have no material interest in the company or the company needs to be non profit making.
Interesting – I didn’t know that.
Why should not the owners of any large company pay IHT on the death of one of their brethren? Let’s take this egregious theft to the extreme.
Actually, people with a large investment portfolio built over many years are treated quite gently. Any capital gains accumulated in their portfolio are not taxed to CGT in death so IHT is not a bad deal for them.
Notice how the favoured friends of the elites always get a better deal.
Aye many like in the Channel Islands for tax purposes. One is an ex farmer funny enough who got into the Stock Market in the late 80s, all gambled with the ‘Hill Rights’ for grazing sheep.
So CGT at 20% is worse that IHT at 40%?? Best not get a job as a tax adviser.
There is a bigger point about passing on assets which affects farmers, business people and all of us with personal pensions.
We don’t know how long we have to live nor our children.
if you have a tax payer funded inflation protected large pension you can pass on assets in time to achieve the Nil rate IHT applicable to gifts. You know you will always have enough money coming in no matter how long you might live, regardless of how much the government devalues the currency.
you are also likely to have retired earlier than personal pension members.
People like me who have seven largely from our own funds to build a modest personal pension need always to have spare assets too. There will not be automatic increases for inflation and any pension provider might go bust. Investments that support savings withdrawal might go bust, sink in value or just not be enough.
we have to pay advisers and SIPP managers. We have to take investment and longevity risks and we have to make significant strategic financial decisions in a world of uncertainty. Civil Servants and retired MOs do not have any of these problems. They also pay in only a tiny proportion of the cost.
Furthermore IHT is inherently evil as it taxes the prudent at the worst time. It often taxes already taxed assets. Reeves withdrawal of IHT relief on personal pension funds with about 17 months notice is obscene.
Pensions are a long term arrangement so any change like that is as bad as the way women were treated when their retirement age was suddenly increased. Twice
The point behind the IHT hit is that it will destroy farms and farming within one generation and probably less. It has nothing to do with raising tax.
22 Billion on CC & storage!
And long range missiles for Ukraine so WWIII can kick off.
Is not selling part of a farm to pay tax the same as having to sell off part of a factory with living quarters above the office? How could the business continue with part of the factory missing especially on minimal
profits. And who would want to buy part of a factory if your access was through someone’s property? (Not all farm fields have road or right of way access)
The analogy would be selling ‘shares’ in the company/factory. You then get a potentially disloyal shareholder who may block your business decisions (or tie them up in red tape) and in addition you have to give them their share of the profit from the business. After a couple of iterations your shareholder may own a majority stake and then in the case of a farm the family become tenants – or redundant.
I’m instinctively in agreement with this point of view, but there’s no question that the existing rules are capable of being abused and manipulated. My former chairman died in 2023,having made a great deal of money out of 40 years of entrepreneurial activity associated with the chemical industry, though he had sold his chemical industry assets shortly before his death.
When Probate was granted, I was surprised to see that the estate only paid £168k in IHT out of a gross valuation of approx £27 million. The mechanism that he used to achieve this feat was to buy a farm (he’d owned it for about 30 years) though he didn’t farm it himself. The work being done entirely by contractors.
If the lovely Ms Reeves had targeted just these high-value sham-farmers, she would have found much less resistance to her proposals, but I guess the government’s desperation to fill the supposed £20 billion black-hole in the public finances meant that they’ve ended up having to fleece all farmers.
I really hope this is the case;
”Labour’s Rachel Reeves is reportedly set to resign soon, with an announcement expected in the House of Commons. ”
https://x.com/BritLad95/status/1859630129070153740
YouTube was full of this last night. I will wait and see. Even if she Firks off the replacement will only be another Davos stooge.
And will they have lied about their work experience as well?
Indeed. The more taxes you have and the more exemptions, the more capacity there is for manipulation on both sides.
See my previous comments. The IHT hit is nothing to do with raising funds fir government wastage schemes. It has everything to do with destroying farming and the very essence of this country. Indeed IHT on farmers is about destroying Great Britain.
There is another angle to this.
Your boss will have had tenant farmers. this IHT raid will have a big impact on their livelihood. As ever there are multiple unintended consequences, which should have been looked at before this ridiculous tax was announced.
This is absolutely horrendous news.
I didn’t know farmers had a suicide rate 3X higher than the national average. But why is that the case? Although I think it’s obvious what tipped these poor men over the edge, given it’s so recent, and especially if they were struggling with their mental health anyway;
”BREAKING NEWS; It’s reported that FIVE Farmers have committed>Suicide in the past 7 days! Farming is not my expertise but I absolutely stand with them 100% Generations of farmers should Not be forced to sell land to pay Inheritance Tax such people should be EXEMPT from this TAX.”
https://x.com/NormanBrennan/status/1859549753563893903
They can just be added to the pile of dead pensioners.
The death tax is sickeningly immoral anyway.
File Under: Inheritance Tax is Simply Theft
It seems that people who don’t really understand the world or don’t want to are now in charge. We will now have to live through the unintended consequences of that one way or another. My guess is we will end up with a country that is more diminished.
I can tell from reading the comments that very few of this group have any actual experience of farming or know any farming families as friends.
This policy is a bloody disaster for friends of ours. Their farms are smallish and not really capable of being broken up. It’s also not really possible to sell the odd corner of a field for residential building. Which would actually raise a decent amount in comparison to how much income generation is lost, because it’s nigh on impossible to get planning permission for single houses in the countryside.
They will farm until they die and hope it’s after this vindictive tax grab has been repealed.
Farmers commit suicide because it’s a lonely, hard existence in all weathers with a 24/7 commitment, every day of the year whatever the weather. With zero help from anyone. It’s difficult to make friends, difficult for young farmers to find a partner who’ll put up with the life. But if you’re born to it you are compelled by something innate to do it to the best of your ability.
By the way the photo above is not an agricultural farm it may be a stud farm but it looks more like a professional equestrian set up for show jumping or eventing so it’s not in any way representative.
The farm that is pictured is as you rightly point out, heavily invested in horses. That would be subject to a different tax regime I believe as unless purely a stud farm, equine activities are not exempt from IHT.
Many people seem to be ignoring the reason why farmers were given special treatment. It was an incentive to keep people in farming in order to provide for the country, you know, like people were given incentives to buy electic cars.
My understanding of the IHT exemption was that it helped to ensure continuity of supply of food, as farming could continue through generations. If farm land is sold, and the proceeds are not rolled over in to more farmland within two years, then tax is levied. Either I have misunderstood, or am naive or both, or others are deliberately misunderstanding. Some of the press coverage makes it look as if you can march away from the proceeds of a farm sale without any penalties which, once the overdraft is paid off, is not true.
A house is a home. A farm, which includes the farmhouse, is a business. It really isn’t difficult to understand the difference.
But IHT should not be payable, at all. It is taxing money which has already been taxed multiple times and should be scrapped.
The most important thing that’s passed on from generation to generation in farming is not the capital value of the land, but the knowledge of how to look after the land and get the most from it over many generations. This cannot be put into a simple manual, but requires years of living on the land to understand. We seem to have an obsession with financial value, yet seem not to recognise the value of empirical knowledge.
Excellent article especially like your point about ordinary folk when inheriting only being able to sell part of their assets and then having to take a drop in income. Basically all inheritance tax should be scrapped.
Farmland isn’t the asset, the potential productive output is.
The landowning aristocracy of yore knew this well, it is how they pitched rents. Rents depended on productive output, if set too high the tenant starved, too low and rental income was lost.
It is why land workers couldn’t accumulate wealth because the more they increased productive output, the higher the rent they paid. This is the basis of poor getting poorer whilst rich get richer.
What is being inherited is the means to earn a living and a home. The beneficiaries already occupied the home, so they are not inheriting a second home, and they contributed by their labours to the farm’s potential.
And they will pay tax on that future productive output and had paid tax on previous productive output.
It is the ignorance that the industrial class have of the agrarian class.
I was a tenant of the Crown Estate for over 30 years and can testify to the way rent was decided. If you had a good year just before the triennial rent review, the rent was increased on the basis of expecting around a 25% of the farm turnover. This was especially the case after the two bonanza potato years of 75 and 76 when my rent increased by 110%.
In fairness, the rent was reduced slightly when grain prices collapsed around millennium but seeing the regulatory burden coming over the horizon,I left agriculture in 2007, totally disillusioned and with the feeling there was no longer time to be interested in what you were doing.
My observation is that continuity is the key to keeping land in good condition. When you’ve spent years ploughing the same land over and over again, you get to know all the variations of soil in the fields and how best to crop them and the next generation looks and learns. IHT will destroy this knowledge on the owner occupier land.
It looks like somebody was going through tax receipts looking to screw more out of us to waste when they thought they had found farms as a good source of money. Thieves has the audacity to claim this additional money is to be
pissed away– oops fund the NHS – yes, for a day or so. Labour has not got a clue…Well nothing more needs adding but they have no business knowledge whatsoever. All the business for Labour lot who cosied up to Thieves and Two Tier have gone very quiet especially the twat who runs Iceland who will take a hit of £millions. There is a ditsy blonde bimbo called Susie Stride that provides leftie comedy value on GB News who did agree that Labour needed more MPs with working knowledge such as teachers, nurses… Hands up who can see the obvious problem with this kind of job experience. What about adding train drivers..