Significant tax changes ahead?
He said: “Tax is not a devolved matter, so changes to legislation made in London will impact on the UK as a whole.”
Seamus went on to cite the recent work carried out by a cross party group of MPs, which addressed the issue of tax simplification. This work was undertaken given the strongly held view within the Treasury that it would identify ways of increasing fairness, cut complexity and reduce avoidance, where inheritance tax is concerned.
He continued: “This body has called for a radical overhaul of the inheritance tax system; recommending a substantial cut in the standard 40 per cent rate to 10 per cent.
“This should rise to a maximum of 20 per cent on death for estates worth more than £2m.
“The group is also recommending the scrapping of most of the reliefs including agricultural reliefs.”
“Where farming is concerned, these offer up to 100 per cent tax relief for those passing on family businesses or farms.”
According to Seamus, the cross party report follows a previous investigation into Inheritance Tax (IHT) commissioned by the Treasury and conducted by the Office of Tax Simplification (OTS).
“However, this latest report, which was not requested by the government, goes even further than the recommendations put forward by the OTS, arguing root and branch reform is needed.”
There is also a link between inheritance tax and capital gains tax. Seamus went on to point out that, where the latter tax is concerned, OTS has recommending that in cases where beneficiaries draw down agricultural property relief, the previously accepted free uplift in value of a farm for capital gains tax purposes will no longer apply.
He further explained: “The OTS recommendation is that where assets in the estate benefit from one of the current Inheritance Tax reliefs, there should be no corresponding uplift in base cost for Capital Gains Tax purposes.
“This means there is no immediate charge to CGT, but the beneficiary inherits the original cost of the asset and, the associated gain.”
Seamus concluded: “All of these proposals, if accepted by government, will have a major impact on how succession operates within farming businesses here in Northern Ireland. These are matters which should be assessed thoroughly by all the relevant stakeholder groups within agriculture in the run-up to the 2020 budget.”
Commenting on the recent reports that Agricultural Property Relief (APR) could be removed in the Budget, Sean McCann, Chartered Financial Planner at NFU Mutual, said:
“Removing (APR) could be devastating for the UK’s traditional family farms. Financial returns from agriculture can be lower than many other businesses, so APR enables farmers to invest in their long-term future with the knowledge their farm is sustainable for the next generation.
“If APR is reduced or removed, it would seriously undermine confidence among farmers to make the level of investment currently required for farming to succeed post-Brexit.
“It would also make it extremely difficult for farmers to change the way they work to meet the industry’s ambitious target to be carbon neutral by 2040.
“Combined with cuts in the Basic Payment Scheme from 2021 confirmed this week, many farmers are facing an uncertain financial future.
“The OTS’ recent report on inheritance tax acknowledged the important role both agricultural and business property relief play in ensuring farms and businesses are able to survive when passing between generations.”