Farmers demand judicial review of inheritance tax grab
A group of farmers and business owners are seeking a judicial review of the government’s contentious inheritance tax raid, arguing there should have been a public consultation before the policy was confirmed.
The claim, which was served to the Chancellor and HMRC on Tuesday, does not seek any concrete changes to the overhaul but alleges the government failed to comply with its obligations to consult on significant shifts in tax policy.
As part of its maiden Budget last Autumn, Chancellor Rachel Reeves tightened two decades-old carve-outs that spared farmland and family businesses from being liable to inheritance tax.
She argued the exemptions – known as Agricultural Property Relief (APR) and Business Property Relief (APR) – were being abused by super-rich land and asset owners to get around paying the unpopular levy, and chose to cap the tax-free wrapper at £1m.
The decision, which doesn’t come into force until April next year, sparked months of furious protests across the country from farmers, who dubbed the raid the ‘family farm tax’ and accused the Treasury of miscalculating the number of farms caught up in the raid.
The agriculture industry has been the most vocal in its opposition, but family businesses were also caught up in the raid. The sector’s fledgling industry body, Family Business UK, has warned the move could cost the UK 200,000 jobs, as the owners of family-run firms weigh slashing investment to pay their looming inheritance tax bill.
The Treasury has previously argued ending the carve outs would not target as many struggling businesses and farms as the sector claims. It has also said other exemptions and allowances – such as spousal exemptions, combining the thresholds for BRP and APR across different assets, and the fact those inheriting estates can pay the bill in instalments over 10 years – will soften the blow on farms and family business owners.
Current inheritance tax consultation ‘too narrow’
But in the proceedings, the claimants argue the government’s decision to eschew any sector-wide consultation to the proposal risked it producing “flawed legislation” that would damage family-run farms and businesses.
They are seeking the court’s permission to challenge Reeves’ decision only to launch a narrow, highly technical opportunity for industry representations, which they say constitutes a failure of her “public law duties”.
“The claimants’ position is simply that the government should be held to its public law obligations on matters of tax policy,” said James Austen, partner at Collyer Bristow, the law firm bringing the challenge.
“This claim does not seek to overturn the government’s decision to amend APR or BPR but asks that affected individuals and groups can contribute to a proper consultation exercise to ensure the government has the best possible evidence when developing its tax policy for UK farms and businesses.”
The legal action follows a similar claim against HMRC and the Treasury from a group of private school parents and pupils, which was dismissed in the High Court earlier this month.
The campaigners – who largely comprised parents of children with special educational needs and those from faith schools – had argued the government’s decision to apply VAT on private schools was in breach of some students’ human rights.
In its ruling, the High Court acknowledged some private school students’ rights had been breached, but that they did not outweigh those of other students who stood to benefit from the uplift in funding for state schools the change is designed to yield.
The Treasury did not immediately respond to a request for comment.