How many times have you laughed over the expression “May you live in interesting times”. Well, I think we are, and it does not seem like something to laugh about.

Helen is from a farming family, and we know a lot of farmers in the North of Scotland. We have a lot of sympathy when they are hit with more tax, or should I say ambushed.

Over the years there have been many rumours that Agricultural Property Relief and Business Property Relief were going to be curtailed. These stories have circulated pre-budget most years since the Millennium. But nothing has ever happened. Not only that but from a tax perspective it was better for farmers to carry on owning their farms and allow them to pass at death – no Capital Gains Tax or Inheritance Tax. The only incentives for farmers to pass on a share to the younger generation was the carrots of Quota and Grants for new entrants to the industry, but if you did not care about these, then you left the farm to pass under your will.

That has now all turned on its head, or at least it will once it becomes law. That is because, going forward it is relatively easy to sidestep the new IHT charge by transferring the farm or a part of it to the next generation and then living for 7 years. The whole thing then drops out of your IHT calculation when you do eventually pop your clogs.

So, the real harm is to those farmers who may well be within the elusive 7 years. Farmers tend to die with their boots on and many are now in their 80s and still actively farming. If they transfer the farm now and don’t survive the 7 years, the value, or at least a part of it, will be taken into account in the IHT calculations after they die.

This seems very unfair, given that it was the tax system that encouraged them to hang on in the first place.

Of course, if you gift assets then there may well be a Capital Gains Tax charge but if it is business assets the gain can be held over, so nothing to pay until the farm is eventually sold.

What’s to be done? Well, firstly ignore all the emotional tear jerking stuff in the media. The new tax is there to catch people like Jeremy Clarkson. Did you see him being interviewed on the news? He seems to have bought his farm so he can go shooting and to save inheritance tax. Another one who has come out of the woodwork is James Dyson. According to Google his company owns 33000 acres of farmland with a value of around £500 million. He would now be liable for IHT.

These are not the working farmers that surround us but “gentlemen” farmers using the agricultural reliefs to avoid tax on their substantial estates. Given how the rest of us are having to stump up more tax, that seems fair to me.

But, how do you safeguard the real farmers, the ones who get their hands dirty? Let’s hope that during the bill’s passage through Parliament, that some of these arguments are actively discussed and some accommodations are made.

I suppose that, at the root of all of this is whether you believe that the Tories actually left a Black Hole. I am not going to get involved in that argument. But suffice to say that I did wonder how the former Chancellor could cut National Insurance when services such as the NHS are creaking.

If you don’t believe in Black Holes, you are not going to trust anything this Government says, are you? But, at some level, whether it is government or in your business, you have to believe in what you are being told until you have had the chance to test it. I think most business owners learn to be sceptical about what they hear but you cannot check absolutely everything at the point they hear it. However, wherever possible, I do like to see things for myself and redo the calculations myself.

If you believe in the Black Hole and that education, health service and the rest need improvement, that takes cash. Government is just a large complex business and all large businesses are big and stupid. That’s why we need KPIs in business and also as a measure of the effectiveness of government policies. In our case, we look at various critical metrics regularly. How do we assess Government?

So, the input of the media perhaps make it sound like things are more interesting than they actually are, but nonetheless, the times are interesting enough.

 

Alan E Long

The Long Partnership

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