THE CLA (Country Land and Business) is urging farmers to write to their MP stressing how scrapping inheritance tax reliefs would destroy family farms and jeopardise the country’s food security.

Ahead of next week’s parliament-defining budget, speculation has been mounting that the government is looking to scrap or cap agricultural property relief (APR) and business property relief (BPR), putting farms operating on small margins in the firing line. This is despite Labour’s assurances over the past year that it would not tamper with the reliefs.

For an average family farm of 215 acres, without such reliefs, 40 per cent of the farm’s land would need to be sold to fund inheritance tax liabilities.

A recent CLA poll of more than 500 farmers and landowners found that 86 per cent of respondents said it was ‘likely’ that some or all of their land would have to be sold upon their death, if reliefs are removed. More than 90 per cent said it would damage the UK’s food security.

CLA President Victoria Vyvyan said: “If the government rips the rug from under hard-working farmers by removing these reliefs, it would be a catastrophic betrayal.

“Someone inheriting a family farm from their parents might be forced to sell up to 40 per cent of it to pay the inheritance tax bill. If five per cent of farms have to sell at their next point of inheritance, 27,000 holdings face going out of business. In many cases it would be the end of the family farm and a hollowing out of rural communities, stifling rural entrepreneurialism.

“We are urging farmers to write to their MP asking them to help protect food security and support the rural economy by maintaining these reliefs.”

APR exists to ensure the continuance of farming after the death of the farmer, while BPR fulfils the same objective for other types of family businesses.

Reliefs allow farmers and rural business owners to continue to produce food, maintain landscapes and support the rural economy. Maintaining a stable capital tax system is important to provide business owners confidence to make long-term commitments, particularly those needed when investing for growth or to deliver for the environment over the coming decades. 

If there was no relief, or even if it was capped as some have suggested, there would be a high tax bill to pay. Government statistics show 17 per cent of UK farms failed to make a profit and 59 per cent made a profit of less than £50,000 in 2022/23. This leaves little scope to pay inheritance tax out of farm income.

Although it is not possible to establish the exact impact on rural businesses of removing inheritance tax reliefs, if it led to a reduction of five per cent in the number of businesses registered in rural areas, this would equate to over 27,500 businesses and potential unemployment of 190,000.

For an average family farm of 215 acres, without IHT reliefs, 40 per cent of the farm’s land would need to be sold to fund inheritance tax liabilities. Diversified farmers would be hit harder: 46-54 per cent of their farm’s land would need to be sold. In aggregate, this poses a real risk to the capacity and efficiency of the food sector in this country.