Following The Budget announcement on the 26th November, Simon Gooderham, Managing Partner at Cheffins, gives his insight on what the reforms could mean for farmers across the country, with a focus on why proactive planning has never been more important.
Simon Gooderham, Managing Partner, Cheffins comments:
“The Budget delivered on 26 November was somewhat chaotic, reflecting the leaks and U-turns by the Government in the preceding weeks and months. The accidental publication of the Office for Budget Responsibility report prior to the Chancellor commencing her speech in Parliament set an unfortunate tone that continued throughout the announcement.
Despite months of campaigning from the agriculture industry, it is a major disappointment that the Government has not listened and re-considered its plans regarding Inheritance Tax, in particular with regard to Agricultural Property Relief. While perhaps they have softened their approach slightly with the ability to transfer the £1 million APR/BPR allowance between spouses, this doesn’t go anywhere near far enough to lessen the impact on the farming industry. The financial and mental strain on the agricultural sector has been immense, with the combination of the tapering out of the Basic Payment Scheme and the dwindling numbers of farm subsidies and environmental grants. It is therefore a major concern that the Chancellor made only the briefest reference to her IHT proposals within the Spending Review, signalling once again that the concerns of the industry have been overlooked.
The cap on relief has created worrying times for the entire agricultural community, and as a result, it is anticipated that more farmland will start to filter into the market as farmers try to offset individual tax liabilities. This aggressive policy approach by the Government to IHT will likely mean that a number of active farms will be swallowed up within the next generation, creating a bleak future for many family farms and rural communities across the country.
At Cheffins, we are here to support everyone in the industry who might be impacted by the Government’s decisions. Forward planning with appropriate professional advice and support will be critical to help farmers navigate their way through this disastrous policy, and we would recommend, as a starting point, that farmers carefully review their business and farming structures to make the most of the allowances available.
The announcement of the APR spouse transfer provides some breathing space but essentially it only defers the problem of a major IHT liability down the line. Early succession planning will be ever more crucial to allow ample time for family discussions and to ensure a smooth handover from one generation to the next. The ambitions of the different individuals involved in the business need to be given sufficient consideration, and whilst this will no doubt involve managing expectations to bring together a coherent and robust long-term plan that benefits everyone, this level of planning will be key.
We also recommend our clients use this as a juncture to undertake a wider review of their business plans in the face of cost pressures, to identify adjustments that can be made and to ensure that diversified income streams are maximised.
For more than 200 years, Cheffins has supported farming and rural communities through recessions, global conflicts, agricultural downturns, and challenging government interventions. As the consequences of these latest reforms become clear, we will continue to work alongside farmers to help them understand the potential impact on their businesses and long-term succession. Agriculture has always been a sector defined by resilience and adaptability. While these reforms will undoubtedly present challenges, we expect many farmers to respond by adjusting their business plans and longer term strategies to secure the future of their farms.”
Cheffins will continue to stand beside the farming community as these reforms take effect. For tailored guidance on succession, tax planning or business restructuring, get in touch with our Rural Team, by clicking here