Reeves broke “promises” on farmer inheritance tax reforms, court hears
Rachel Reeves “broke promises” when she failed to consult over changes to inheritance tax (IHT) reliefs in her first Autumn Budget, a court has heard.
The Chancellor’s proposed changes to agricultural property relief (APR) and business property relief (BPR) represent one of the biggest shifts in IHT policy in decades.
In the 2024 Autumn Budget, Reeves revealed significant changes to the tax code, including applying a 20 per cent tax to agricultural assets over £1m. But after a year of protests by farmers, Labour announced a surprise partial U-turn in December, raising the threshold to £2.5m from £1m, effective from April 2026.
The Treasury now faces a legal challenge over the procedure it undertook before making these changes, as a judicial review argues that it acted unlawfully by failing to follow its 2011 ‘Tax Consultation Framework’.
The claimants are farmers Thomas Martin and George Martin of the campaign group Farmers and Businesses for Fair Tax Relief, and the professional services firm Alvarez & Marsal.
Barrister Aparna Nathan KC told the court on Tuesday that the framework requires at least one public consultation, but stated that none was carried out. Instead, it was argued, rather than consulting on the totality of the changes to APR/BPR, the Chancellor published a consultation document on trusts, which made up “only a limited aspect” of the proposed changes.
Nathan KC told the two judges that “the defendants [government] broke that promise” for a public consultation.
Questions raised over parliamentary privilege
However, another argument in the case concerns whether the court has jurisdiction to review executive actions that lead to legislation.
Lindsay Hoyle, the Speaker of the House of Commons, was granted permission to intervene in the case due to constitutional issues at stake, and is expected to have arguments presented to the court on Wednesday.
According to court documents, the Speaker takes issue with the claim on the basis that it infringes Parliamentary privilege, as the Finance Bill is currently being read at the House of Lords.
In the Speaker’s opinion, “the claim now appears to be academic, given that the Finance Bill has been introduced with the relevant provisions, and is currently before Parliament”, and that the court would be engaging in a “confrontation” with Parliament.
In court on Tuesday, the two judges, Lady Justice Whipple and Mr Justice Fordham, challenged the “separation of powers” to the claimant’s barrister.
The Devereux Chambers silk argued that the claimants are challenging a decision made by the Chancellor in her executive capacity (as a Minister), not as an MP, and that this decision occurred outside Parliament.
The court is being asked to issue a formal declaration that the Treasury acted unlawfully by failing to conduct a public consultation on changes to IHT reliefs.
The hearing will conclude on Wednesday, following the Treasury and the Speaker’s arguments, with a judgment in the coming months.