New ‘Tractor tax’ blow to Starmer as Labour expert calls for government U-turn

The “tractor tax” row has taken a dramatic new flip after a pro-Labour tax professional utilized by Sir Keir Starmer to help the transfer known as on him to reverse his determination.

Labour-supporting tax campaigner Dan Neidle says the Finances determination to cost loss of life tax on household farms price over £1m needs to be dumped in favour of a £20m threshold.

It might take away at a stroke the specter of farmers who need to go on their farms to their youngsters being compelled to promote as much as pay a large tax invoice, mentioned Mr Neidle. As a substitute, the federal government ought to goal wealthy landowners who use the present inheritance tax (IHT) exemption on farms as a tax dodge, he argued.

Insisting his “dramatic and easy” blueprint to finish the row is “workable”, he mentioned it was time for all involved to do some “correct considering” and ignore “the political noise”.

Mr Neidle’s intervention was hailed as a breakthrough by farmers outraged by the levy introduced by chancellor Rachel Reeves final month.

Nationwide Farmers’ Union (NFU) president Tom Bradshaw advised The Impartial: “Having seen one of many staunchest advocates for her tax change his thoughts, it might be good to assume the chancellor and people who got here up with this mess will look once more.”

Mr Bradshaw praised Mr Neidle for his “willingness to look once more on the impacts of this tax”.

He added: “Having accomplished so, he noticed that the coverage is badly thought out, cripples household farms not tax avoiders, and could have a devastating affect.”

Influential Mr Neidle was dragged into the fiasco final month when he backed the federal government in a dispute over what number of farmers could be hit by the brand new tax, resulting from take impact in 2026.

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In an article for the BBC, Mr Neidle mentioned Ms Reeves’s declare that few farmers could be affected was “seemingly” to be true. Sir Keir controversially seized on it as proof that farmers who claimed way more could be affected have been unsuitable.

Amid claims of political bias, the BBC was compelled to drop its description of Mr Neidle within the article as an “unbiased tax professional”.

Mr Neidle makes no secret of his pro-Labour views and is a member of Labour’s nationwide structure committee that offers with celebration self-discipline.

He has received reward up to now for investigations into tax fraud by his non-profit-making Tax Coverage Associates group.

Underneath Mr Neidle’s new proposal, there could be a twentyfold improve within the degree at which IHT kicks in on farmers.

As a substitute of the £1m in Ms Reeves’s Finances, he says it needs to be £20m – and that this could successfully save all household farms.

“With this transformation, IHT would don’t have any affect on a household farm succession planning, if the farmer’s heirs proceed to personal the farm,” he mentioned.

“We’d be taxing farmers so much much less, however IHT-exemption-chasing traders much more. All in all, the income distinction for the Treasury is probably going [to be] small.

“The farmers and tax advisers I’ve spoken to assume that is workable. The query is whether or not the present political noise creates any area for correct coverage considering. Let’s see.”

With extra protests anticipated to observe scores of tractors descending on London final Wednesday, the justification for Ms Reeves’s extending inheritance tax to agricultural land in her Finances seems to be unravelling.

It comes as Labour MPs have privately advised The Impartial that they can not perceive why Labour picked a battle with farmers and rural communities for a tax which raises simply £500m a yr.

It’s understood {that a} caucus of rural Labour MPs has already been set as much as search for a strategy to persuade the federal government to again down.

As well as, the revered Institute for Fiscal Research (IFS) assume tank gave proof to the Commons setting, meals and rural affairs committee during which it appeared to criticise the federal government’s proposals.

Whereas the coverage had been developed to cease rich folks like entrepreneur Sir James Dyson from utilizing the loophole to keep away from inheritance tax, David Sturrock of the IFS accepted it’s “very seemingly that this transformation will have an effect on household farms on any affordable definition”.

In its report, the IFS mentioned: “In some instances, the farm will merely yield too little earnings (and the heir could have too few different sources) to pay the tax. The homeowners would possibly select, or be compelled, to promote half or the entire farm. It is a function of inheritance tax: the identical applies to these inheriting a household house, for instance.”

The Treasury has additionally come below fireplace for not finishing up an affect evaluation into the impact of the coverage whereas claiming it can solely have an effect on round 500 farms a yr.

The NFU estimates that in actuality, it is going to be between 2,000 and a couple of,500 a yr, which might imply that over 30 years, as many as 70,000 farms could possibly be impacted.

The NFU additionally seized on Division for Setting, Meals and Rural Affairs (Defra) figures which steered 60 per cent of farms could possibly be hit. That is disputed by the federal government which described it as a “misreading” which excluded tax allowances.

In its report, the NFU acknowledged: “ sector impacts, the tax cost ensuing from a £1m threshold would wipe out returns for a median cereals farm and round half of returns for common dairy farms. Contemplating typical historic returns on a median cereals farm and factoring within the discount in direct funds, a farm making a revenue of £34,000 will likely be hit with 10 annual IHT instalments of £53,000, over 1.5 occasions its earnings. Even at a £2m threshold, the annual tax funds of £33,000 would equal farm earnings.”

The union additionally accused the Treasury of failing to take three key components under consideration which has pushed up the worth of farms.

First, it has included claims on land parcels or non-commercial models which must be stripped out to calculate the true variety of farms affected. Second, it solely checked out agricultural property aid and never enterprise property aid of their calculations. Lastly, the NFU claims the federal government ignored the double-digit share development in agricultural land worth since 2021-22.

Which means that the Treasury’s declare that about 28 per cent of farms could possibly be affected is unsuitable in accordance with the NFU, which maintains it’s nearer to 75 per cent.

Mr Neidle, who denies he has modified his thoughts on the coverage, advised The Impartial: “My figures modified downwards however the debate concerning the figures is a little bit of a distraction in my opinion (and the NFU agree with that). The query is how the principles ought to work.

“I’m not asking the federal government to again down. I’m asking them to double down and obtain their purpose of stopping IHT avoidance extra successfully. On the similar time, that protects household farms. It’s win-win.”

A Treasury spokesperson mentioned: “Our dedication to farmers stays steadfast – we have now dedicated £5bn to the farming finances over two years, together with more cash than ever for sustainable meals manufacturing, and we’re growing a 25-year farming roadmap, specializing in how you can make the sector extra worthwhile within the many years to come back.

“Our reform to agricultural and enterprise property aid will affect round 500 estates a yr. For these estates, inheritance tax will likely be at half the speed paid by others, with 10 years to pay the legal responsibility again interest-free. It is a truthful and balanced strategy which fixes the general public providers all of us depend on.”