Report reveals damaging impact of inheritance tax changes on family businesses
The most comprehensive ever research into the impact of the government’s proposed changes to Inheritance Tax reveals the devastating effect it could have on the hundreds of thousands of family-run businesses in the UK.
The Family UK (FBUK), supported by 32 trade associations, and conducted by CBI Economics, reveals that every sector of the economy and every region of the UK will be hit as family businesses and farms cut jobs and investment.
Tom Gauterin, director who specialises in Trusts, Estates & Tax at national law firm Freeths, said: “FBUK’s report backs up what many clients have been saying: the government’s planned changes to APR and BPR are going to be detrimental to a wider range of businesses than had been claimed.
Although most of the attention following the October Budget has focused on farms, the restriction on BPR will affect family-owned businesses in every sector. Many of these will be smaller enterprises for whom a sale is neither intended nor possible – and on which the impact of a 20% IHT charge would be huge. A further problem is that, as IHT is payable by an estate rather than the business itself, cash to pay that tax may need to be extracted as (taxable) dividends, making the real cost closer to 30%.
Undertaking some planning before the changes take effect is possible, but some of the options – gifts to children or employees, a sale, buying insurance, or even moving abroad – may be neither commercially viable nor suitable for other reasons.
Given how widespread the effect of these changes is likely to be, it would be welcome if the Government were to review their policy given the risks to UK SMEs that this report identifies.”