Labour is planning to introduce “devastating” inheritance tax changes to raid millions from families and farmers.
The party is reportedly planning to scrap two exemptions – agricultural and business property relief – that currently allow farms and businesses to be passed down at death without their families paying the divisive 40 percent charge.
The move is part of a plan to scrap a number of tax reliefs in a “loophole” closing exercise which Labour believes could raise as much as £4billion, reported the Times.
However, it is still not known whether Labour is considering scrapping the relief or reforming the exemption so it can no longer be used by investors who own agricultural land but are not full-time farmers.
Meanwhile, Business Relief lets families claim tax relief when inheriting business assets or shares in a company.
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Sean McCann of financial advice firm NFU Mutual said: “Removing Agricultural Property Relief could be devastating for the UK’s traditional family farms.
“Financial returns from agriculture can be lower than many other businesses.
“Agricultural Property Relief enables farmers to invest in their long-term future with the knowledge their farm is sustainable for the next generation.
“Similarly, removing Business Property Relief would be a significant disincentive to business owners, and is likely to mean that in many cases the next generation would need to borrow significant sums to pay the tax, rather than to invest in future growth and jobs.”
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Under the current rules, agricultural property can be 100 percent exempt from death duties.
Business property relief also protects family firms being passed down the generations, but also exempts some Alternative Investment Market (Aim) shares from inheritance tax, providing a tax planning tool for those with spare cash to invest.
Rachael Griffin of investment firm Quilter said the idea of scrapping agricultural and business property reliefs have been “tabled by a number of think tanks” in recent years, saying it was “likely the Conservatives will be mulling over the possibility too”.
Cutting Business Property Relief would impact investors with shares in unlisted companies, preventing them from claiming 100 percent inheritance tax relief on their investments and leading to an exodus from Aim shares, she added.
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