The inheritance tax raid on family firms has left business owners ‘demoralised’ and hammered investment, Rachel Reeves has been warned.
In the Budget this week, the Chancellor stuck to her plan to hit family businesses and farms worth more than £1million with death duties of 20 per cent from April next year.
Campaigners welcomed one ‘minor tweak’ that will allow the tax-free allowance to be transferred between spouses – meaning a combined allowance of £2million for married couples.
But they warned his was not enough and called for the changes to so-called business property relief (BPR) and agricultural property relief (APR) to be scrapped.
Writing on the Daily Mail website, Neil Davy, chief executive of Family Business UK, said: ‘I’ve lost count of how many times family business leaders have told me how demoralised they feel with red tape around every corner and inheritance tax threatening to undermine the future of their business.
‘We’ve spent the last 18 months warning the Government of the damage this tax will do to the economy, forcing companies to cut investment and hiring.’
More than half of family firms have paused or cancelled investments
And with 55 per cent of family firms pausing or cancelling planned investments, he added: ‘It is little surprise then that the OBR is forecasting business investment will dwindle up to the end of this Parliament.’
BPR was introduced in 1976 by then-Labour chancellor Denis Healey to protect family firms from having to sell up if the owner died.
‘By failing to consult and materially amend the policy, this Government will be remembered as the first in 50 years to abandon a policy designed to support the model of family business ownership,’ said Davy.
He added: ‘This country needs growth. But the family business and farm tax is anti-growth and a policy mistake. The fact government made a minor tweak to it tells us as much. But correcting this tiny wrong does not make it right.
‘The right thing for government to do now – in the national interest – is to stop this policy change before it comes into effect in April and stop the damage it is doing by forcing family business owners to cancel investment, stop hiring and ride out the storm.’
‘There is still time for government to do the right thing, to work with us to find a better solution that gives Britain’s family business owners the confidence to do what they do best – invest in the long-term future of their business and their employees, and grow Britain’s economy, as they have done for generations.’
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