A clutch of the wealthiest families in the UK are taking advantage of inheritance tax rules designed to help small businesses and landowners, saving themselves almost £700m a year, according to a report.
The campaigning group Tax Justice UK found 234 families with more than Â£1m in business assets shared £458m in relief in the 2015-16 year thanks to inheritance tax breaks.
This represented almost 80% of the total business tax relief given in that financial tax year.
The report also found 261 families owning more than £1m in agricultural property shared £208m in tax relief in 2015-16, 62% of the total relief given out that year. Similar amounts of tax relief were claimed in each of the previous two tax years, according to the report, the findings of which are based on freedom of information requests to HM Revenue and Customs (HMRC).
The campaigning groups findings prompted Labour to criticise the governments premise that the aim of the tax breaks is to provide support to smaller family businesses and farms.
This report lays bare the extent to which the Tories inheritance tax regime favours a wealthy few families, said John McDonnell, the shadow chancellor. Labour will tackle the scourge of tax avoidance and review tax reliefs to make sure the rich pay their fair share towards the public services we all need.
The report, How Inheritance Tax Breaks Favour The Well-Off, found the wealthiest families received the biggest breaks. The 51 families registered with HMRC as having business property worth more than £5m shared an approximate tax saving of £327m. This works out to an average saving of £6.4m per estate. And 62 families registered as owning agricultural property valued at more than £2.5m shared a £107m tax savings pot an average of £1.7m per estate.
Robert Palmer, the executive director of Tax Justice UK, said: Wealth inequality is at staggeringly high levels and this report shows how it is in part underpinned by inheritance tax relief. There is no justification for politicians allowing costly tax breaks to continue to operate in this way.
The report argues the system, which allows large amounts of agricultural and business property to be exempt from inheritance tax, is fuelling property inflation, with investors increasingly seeing opportunities such as agricultural property as a tax-efficient target. In 2011, 60% of agricultural land was purchased by farmers. By 2017, farmers accounted for 40% of purchases, as investors flocked to buy agricultural land and property.
Alison Thewliss, the Scottish National partys shadow Treasury spokeswoman, said: This report sheds some light on what we know to be true that the UK government have ensured that the rich get richer.
In January, an analysis of figures by HMRC revealed the cost to taxpayers of all inheritance tax loopholes has risen to almost £2bn annually. The levy is paid by fewer than one in 10 estates and charged at 40% above the tax-free threshold of £325,000, but exclusions include relief on agricultural land, business shares and transfers to charities.
CWC’s Partner and Solicitor, Lucy Atwill comments
“Whilst I appreciate the frustration of some that it appears to only be the wealthy families benefitting from these reliefs, the fact is these rules on inheritance tax and the various reliefs and allowances available, are available to the public, and with a little help from their accountant or solicitor, can be maximised by most families who have some sort of business or agricultural assets. BUT in is extremely important these families take advice because it is just as easy to lose the relief as it can be to gain it, if you make changes to your business that do not qualify for these reliefs.”
For legal help and advice regarding inheritance matters, contact our expert team on 01752 204444
Original article by Mark Sweney for The Guardian – See the full original article here