Inheritance Tax relief cap still threatens growth and jobs despite increase, warns Moore Thompson

The Government’s decision to raise the 100 per cent Agricultural Property Relief (APR) and Business Property Relief (BPR) cap to £2.5 million has been welcomed by some advisers.

Andrew Heskin, Partner at Moore Thompson, says the announcement is an improvement, but remains a cause for concern.

“The increase is welcome news,” he says. “However, the limit on full APR and BPR remains a major threat to UK businesses, economic growth and job security.”

He believes the debate around so-called “tax loopholes” misses the point of why these reliefs exist in the first place.

“We have a tax, legal and economic structure that has evolved over the last 50 years and has been a real strength of our economy,” he says.

“These reliefs were put in place so that a tax designed to raise funds on the transfer of wealth does not destroy jobs or dismantle businesses when ownership passes to the next generation.”

Andrew warns that removing or restricting these reliefs risks undermining that structure.

“When the Government tries to remove tax reliefs, it is like playing Jenga,” he says. “At best you weaken the framework. At worst, it all comes falling down.”

Andrew explained that limiting the 100 per cent relief to £1 million would have been unaffordable for any business worth more than £2 million and would have forced many family businesses to sell.

Raising the threshold to £2.5 million reduces that immediate risk for smaller firms.

“It should allow small family farms and businesses to plan and avoid a forced sale on death,” he says.

“However, efficiency and progression require businesses to expand and many of our most competitive family farms and companies have done exactly that. In my opinion, the £2.5 million limit will still be too low for them and will act as a brake on growth and development.”

Despite the higher cap and the ability to transfer allowances between spouses and civil partners, Andrew says detailed planning remains essential.

“All businesses still need a thorough review. Wills must be appropriate and up to date and asset values need to be established and kept under review, which is often complex and costly.

“There are also business owners who are not married or in a civil partnership and cannot rely on transferability.”

Families who have already planned around the original £1 million cap should now reassess their position in light of these new developments.

“Business and farm owners should review the plans they have made and consider whether they need to be modified or if they are still fit for purpose,” he says.

The change is already affecting advice ahead of the end of the tax year.

“Much of the previous planning would have led to more complicated and expensive structures,” Andrew says.

“The higher cap may allow some of that to be simplified and help avoid unnecessary cost.”

While Andrew does not expect fundamental changes to the rules in the near future, he believes uncertainty will remain.

“There may be further tweaks to the rules around APR and BPR and that makes it even more important not to rush decisions.”

Moore Thompson has more than 100 years of experience supporting individuals and businesses with all their accounting needs from its offices across the East of England.

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