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There is an obvious difference between a £3m farm and a £3m private house. The former produces food/drink that the country needs, the latter is private property.

Plenty of houses can be worth £3m in the sarfeast without being a mansion - its a crazy market. Tax is due, it's probably being sold, sentimental value perhaps but its just a house and the person inheriting almost certainly already owns at least one other.

The farm? Selling up removes the business (unless there are large liquid assets which can go to pay the bill. Selling up realistically means small farms being bought by bigger farms, which changes the farming industry into something that isn't optimal for producing food/drink products which the country needs.

Comparing one to the other is a bit daft...

“The former produces food/drink that the country needs, the latter is private property.” The country does also need houses.

“the person inheriting almost certainly already owns at least one other” Often they do, but not almost certainly.

“Selling up removes the business (unless there are large liquid assets which can go to pay the bill.” The tax is only on the value above the threshold, so the bill isn’t necessarily so much that selling up would be required. You don’t need liquid assets. If you own land worth that much, you can get a mortgage.

“Selling up realistically means small farms being bought by bigger farms” Small farms won’t be paying taxes. Only ~30% of farms will and they will be the bigger farms. This creates an economic incentive in favour of splitting bigger farms into smaller farms.

“which changes the farming industry into something that isn't optimal for producing food/drink products which the country needs.” What’s you evidence here? Big farms can be more efficient if your aim is to maximise food production.

Pity there is not an "Absolute Bollox" button

Morning all

Ed Davey was at the farmers' rally as well so does that mean he was on the same bandwagon?

Oppositions oppose - that's what they do - but there's a difference between contradiction and argument as Mr Python once demonstrated. For every tax rise they wish to reverse, both the Conservatives and the Liberal Democrats have to show how they would "compensate" the public finances. I suspect both may find it difficult as we approach the next election to square the circle of cutting taxes, improving services and balancing the public finances.

As we've also seen this morning, public sector productivity remains a big problem - the kneejerk response of sacking 50% of civil servants won't help that at all.

The problem is we can't have a proper conversation about tax in this country - there's a claim from some we are "over taxed" (not quite sure what that means) and there's a valid question as to whether we get any "value" from the taxes we pay but the truth is we have a deficit which needs to be closed and borrowing which needs to be reduced and there's little or no honesty from anyone about any of this.

Yes, cut spending if there is an obvious argument (and nothing, including the armed forces, should be exempt) but the Party is over and we all now need to pay the bill and if that means raising basic rate tax to 25p and higher rate to 50p and looking at property and land asset value taxation, so be it.

This highlights the fundamental flaw in Reeves budget. Taxes were increased as was necessary but spending increased even more with consequential increases in borrowing. She might get lucky and be bailed out by an unexpected surge in world growth but if she is unlucky and the winds of change from the US are adverse she has put the ship of state in a highly precarious position dangerously close to the rocks.

Indeed and this is why I don't support either Labour or the Conservatives (and I'm struggling with the others as well).

I'd have much preferred a more radical Budget from Reeves with big tax rises and spending cuts to reduce the deficit and borrowing (to be clear, I'm not opposed to all borrowing by any stretch - borrowing for capital investment isn't a bad idea and an obvious way to fund infrastructure projects).

Her problem is she probably couldn't sell spending cuts to her Party any more than Hunt could have sold tax rises to his - his NI cuts were irresponsible and the equivalent of salting the earth for the new Government.

The debate on tax has been so poisoned you can't even say the words "income tax rises" without getting a heap of vitriol from all sides. Let me be very clear - IF you can bring the public finances back under control and get some growth in the economy, tax cuts can be back on the table (though I'd much rather we paid off the debt to reduce interest payments and leave a better economic legacy for the future).

On the basis that I want my Government to be competant even if I disagree with them on a lot of things, the Starmer reign so far really does worry me.

Three big tax policies have resulted from the Budget - Removing the Winter Fuel allowance (which I know was announced prior to the budget), Inheritence tax on family run businesses and farms, and increasing Employer's NI.

The first two of these are being done for explainable reasons (The state should not be giving money to those who don't need it just because they are old, and rich investors are using the IHT arrangments to avoid paying tax) but both have been completely ballsed up with their implementation - not the PR but the actual planned implementation.

It would have been easily possible to have devised a system to properly means test the WFA removal rather than using the blunt tool of Pension Credit and it was certainly possible to devise an IHT system that did not threaten the future of family farms and businesses whilst still closing the investment loophole. I just get the impression that, because they don't actually understand (or care?) about the collateral damage, they plough on with the most basic sledgehammer applications of their plans safe in the knowledge that they can always point to the intended target as an excuse. They are the Bomber Harris of politics.

(On the third policy of employers NI we have yet to see the effects of that but I suspect a lot of smaller businesses will be laying off staff or shutting down entirely and again there seems to be no effort to differentiate between larger companies and the small businesses which run on very low profit margins)

Meanwhile we still don't have an effective or fair tax regime for multinationals.

Isn't the problem not just the employer NI increase but also the substantial rise in the NMW making jobs much more expensive, especially in the hospitality industry

https://x.com/ONS/status/1858805323441598762

@ONS
Public service productivity in Quarter 2 2024 is estimated to be 8.5% below its pre-#COVID19 pandemic peak in Quarter 4 (Oct to Dec) 2019.

And this is our problem in a nutshell. Our public services are falling apart, not because of cuts in spending which have been modest to non existent) but because we are getting less and less for our money. That is the problem the last government largely ducked and which this government has to come to terms with. If they don't no amount of additional taxation will be enough.

And the multi billion pound question is... why?

Is it about a lack of the smack of firm management, is it the money spent on diversity consultants, or is it that we have solved bottlenecks with the short term fix of extra bodies rather than equipping staff with better tools to achieve more?

My guess (based on the way that capital budgets always get raided to fix crises, and have been for decades, and we're going to be under Hunt) is that the last diagnosis is the main problem.

I think from my limited experience that there is a lack of quality management, that WFH has in fact reduced people's output despite all the claims to the contrary, that it has encouraged a mind set that this job is for my benefit rather than the benefit of the people to whom the service that is being provided, that it is my mental health and work life balance that is important, not the quality of life of the service users I am supposedly working for and, perhaps above all, the never ending multiplication of emails to masses of people who don't need to receive them but get interrupted anyway.

None of this will stop me from WFH today, of course.

The left are coming over as extremely "nasty" in their anti-farm comments.

Well, I'm not of the left, but I'm generally sceptical of giving any industry special treatment. And I'm especially sceptical when the special treatment is abused by other groups of people to avoid taxes.

Am I coming over as nasty?

I have no objection to farmers. They are carrying out economic activity, just like shoemakers, bakers, shopkeepers and insurance entrepreneurs.

But I also struggle to see why they should get special treatment.

Which is why I'd suggest replacing inheritance tax with a small annual gross assets levy. You can pass whatever you like onto your children, free of tax, but for people with assets of more than £1m, you need to make an annual payment 0.1% or 0.2% on the excess.

And this would be payable by anyone owning assets in the UK, not just by UK taxpayers. (I.e. tax the asset, not just resident taxpayers.)

It would probably raise almost exactly the same as IHT. It would avoid massive one-off payments. It wouldn't treat different family run businesses differently depending on the industry they were in.

And it wouldn't distort the market by allowing investment managers to buy up farmland solely for the purpose of avoiding IHT.

I think the difference is that farmers put food on our tables and often it's a pretty thankless andow margin industry. Isn't there a case to be made that having a proper food security reserve is worth a few tax breaks?

Does it have the effect though?

Or does the tax break encourage family farmers to sell to Mr Investment Manager who wants to dodge tax?

The problem is that farms - and other family owned businesses - are in an unusual situation. For them to exist they have to have assets which have a very high paper value - land, machinery, factories etc - but the profit margins are often extremely small. This means that treating them in the same way as other inheritences will almost certainly lead to them being put out of business. Now that may not matter to some people. But I do think that as a nation we do far better having large numbers of family owned businesses rather than a few hundred multinationals owning and running everything. If you want all the family businesses to cease to exist - or at least don't care - then I can follow your thinking on this. But if you bellieve that a diverse range of small businesses and entrepreneurship is something to be valued then you ned to find another way to deal with the genuine issues of investment tax avoidance without hammering the real businessmen - whether they are farmers or boot makers.

In 2023 the average ROCE for farms was 0.5%

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Don't forget though that the tax break will have had the effect of pushing the ROCE down, because it will have pushed the value of land up.

Surely the solution here is the @Malmesbury compromise: i.e. the IHT
break exists so long as you don't sell the farm. If you do, then you need to pay it back.

Yep that is exactly the way to do it. Trouble is neither Labour nor the supporters of the tax on here are willing to consider it. They would rather pretend it isn't a problem and all the farmers are either vastly rich or too poor to qualify.

Does it roll over as a liability?

You can imagine in, say, 3 generations, someone who hates farming but can’t sell because they would owe a massive amount of IHT that would destroy all their capital base.

The non-absurd way would be to say that the previous liability is continued when it is inherited again. That is, X% inheritance tax is due when the land is sold. Rather than trying to roll it over.

On the basis that I want my Government to be competant even if I disagree with them on a lot of things, the Starmer reign so far really does worry me.

Three big tax policies have resulted from the Budget - Removing the Winter Fuel allowance (which I know was announced prior to the budget), Inheritence tax on family run businesses and farms, and increasing Employer's NI.

The first two of these are being done for explainable reasons (The state should not be giving money to those who don't need it just because they are old, and rich investors are using the IHT arrangments to avoid paying tax) but both have been completely ballsed up with their implementation - not the PR but the actual planned implementation.

It would have been easily possible to have devised a system to properly means test the WFA removal rather than using the blunt tool of Pension Credit and it was certainly possible to devise an IHT system that did not threaten the future of family farms and businesses whilst still closing the investment loophole. I just get the impression that, because they don't actually understand (or care?) about the collateral damage, they plough on with the most basic sledgehammer applications of their plans safe in the knowledge that they can always point to the intended target as an excuse. They are the Bomber Harris of politics.

(On the third policy of employers NI we have yet to see the effects of that but I suspect a lot of smaller businesses will be laying off staff or shutting down entirely and again there seems to be no effort to differentiate between larger companies and the small businesses which run on very low profit margins)

Meanwhile we still don't have an effective or fair tax regime for multinationals.

...

There is an obvious difference between a £3m farm and a £3m private house. The former produces food/drink that the country needs, the latter is private property.

Plenty of houses can be worth £3m in the sarfeast without being a mansion - its a crazy market. Tax is due, it's probably being sold, sentimental value perhaps but its just a house and the person inheriting almost certainly already owns at least one other.

The farm? Selling up removes the business (unless there are large liquid assets which can go to pay the bill. Selling up realistically means small farms being bought by bigger farms, which changes the farming industry into something that isn't optimal for producing food/drink products which the country needs.

Comparing one to the other is a bit daft...

“The former produces food/drink that the country needs, the latter is private property.” The country does also need houses.

“the person inheriting almost certainly already owns at least one other” Often they do, but not almost certainly.

“Selling up removes the business (unless there are large liquid assets which can go to pay the bill.” The tax is only on the value above the threshold, so the bill isn’t necessarily so much that selling up would be required. You don’t need liquid assets. If you own land worth that much, you can get a mortgage.

“Selling up realistically means small farms being bought by bigger farms” Small farms won’t be paying taxes. Only ~30% of farms will and they will be the bigger farms. This creates an economic incentive in favour of splitting bigger farms into smaller farms.

“which changes the farming industry into something that isn't optimal for producing food/drink products which the country needs.” What’s you evidence here? Big farms can be more efficient if your aim is to maximise food production.

Pity there is not an "Absolute Bollox" button

That's unfair, Robert and TSE would have their phones pinging every few seconds.