Healey urged to drop ‘death tax’ holding back family businesses
John Healey has been urged to drop a so-called “death tax” which business leaders say means family firms are losing out to overseas investors.
The Chancellor has been told to unwind sweeping reforms to inheritance tax, made by his predecessor Rachel Reeves, which family businesses say undermine the government’s attempts to drive economic growth through devolution.
A group of top industry bodies, representing more than 200,000 UK businesses, have written an open letter, calling on the Chancellor to unwind Reeves’ reforms to Business Property Relief (BPR).
Reeves’ decision to cap relief on inheritance tax at £1m meant that all assets above this threshold would be taxed at 50 per cent.
The move provoked fury among the UK’s farmers and manufacturers and the government eventually U-turned on the policy, pushing the tax-free allowance up to £2.5m.
But Family Business UK, which organised the letter to Healey, claims that the changes have still caused family-run businesses to reduce investment, freeze hiring and reconsider their long-term succession plans.
Family businesses represent more than 90 per cent of the UK’s businesses and 57 per cent of its workforce, according to research by the trade association.
Family Business UK claims the “death tax” penalises British firms with tax conditions that do not apply to foreign companies, giving these overseas investors a leg-up.
Family firms ‘delaying investment’
Neil Davy, the trade body’s chief executive, said: “The Chancellor has a choice in his first Budget: make it harder for British family businesses to invest, employ and pass their businesses on to the next generation by sticking with his predecessor’s reforms, or give them the confidence to get on with building the economy.
“Reversing these changes would send a powerful message that Britain wants businesses to stay here, invest here and grow here – not become forced-sale opportunities for overseas buyers.”
John Newcomb, chief executive of the Builders Merchants Foundation, said that the inheritance tax changes unfairly impacted the housebuilding industry because many of these firms are family-run.
In the months since the Iran war broke out, housebuilders have been hammered by rising supply chain costs and softening consumer demand.
“We are already seeing investment decisions delayed among the many family-owned businesses in our membership who will be affected by any change to inheritance tax relief,” Newcomb said.
The letter was also signed by the bosses of UK Hospitality, the British Independent Retailers Association, Build UK and the Country Land and Business Association.