A cut and paste from James Quarmby’s (tax lawyer) linkedin post:
Yes, it’s great news that the government has finally retreated from it’s indefensible position, but it’s taken over a year, a lot of heartache, worry and plenty of angry protests.
What a waste …
The truth is that the IHT proposals were all the result of a massive cock-up, which the government has been furiously defending ever since, for fear of looking weak.
Until today, that is.
The genesis of this mess was a policy paper from the IFS which concluded that AR/BR was not fit for purpose as it was being exploited by wealthy investors (those rotters!). The IFS proposed reducing the allowance to £500k. The logic behind this was never properly explained, but it was just a policy paper, so who cares…?
Problem is that the IFS has the ear of Labour and at the latter’s last conference before the election there was a fringe event with Darren Jones (then shadow Treasury secretary), the CIOT and (you guessed it) the IFS. The consensus at that event was that AR/BR was broken and something needed to be done.
Fast forward to Labour winning the election and, in pretty short order, adopting the IFS proposal, albeit with a higher £1m limit.
Despite the fact that this was a major change to IHT there was no consultation, meaning it was announced at the 2024 Budget as a decision. Hard to backtrack from that, especially for a new government.
We then find out that there wasn’t even a proper impact assessment of the measures, with mere guesses based on static data as to the number of farms affected. Also, in a breach of protocol, the Treasury didn’t consult with DEFRA ! I’m told that officials at DEFRA were furious and DEFRA Northern Ireland office actually complained publicly about it.
The government rushed into a major IHT reform without taking proper advice, without an impact assessment or feedback from the one department (DEFRA) which actually knows about farming and without even putting the proposal out for consultation. It was an extraordinarily silly thing to do and, even when they realised that, ministers doubled down, claiming it was “fair” and wouldn’t affect many farms, even when they knew it would.
This is an abject lesson in how NOT to introduce a major reform to tax policy.
Let’s hope it never happens again.
Big love ❤️ to all our farmers.