One in four family businesses say IHT changes will have ‘material impact
Jacob Grattage, Reporter, Business & Accountancy Daily
Overhaul of inheritance tax will have ‘material impact’ on family owned businesses with job losses and investment cuts, and some planning asset liquidation
Despite the government’s sudden u-turn on the original £1m business property relief (BPR) threshold, increasing it to £2.5m, family businesses fear for the future, with 70% saying they have already ‘taken steps to mitigate the impact’, with 27% pausing or cancelling investment, and 23% cutting jobs, found the latest survey from Family Business UK.
Along with short term cost cutting, the majority (77%) plan to take further action over the next three years, with 26% considering writing life insurance options to cover inheritance tax (IHT) bills, 23% planning further job cuts, and 10% warning they plan to close the business and liquidate assets.
But despite the concerns, three out of four (74%) were ‘confident they will remain family owned in a decade’s time’.
Business owners blamed increasing costs and regulation, a weak economic outlook and the changes to inheritance tax as their main concerns, with a growing number said they were having ‘difficulty in finding family members willing to take on the business’.
The changes to IHT will have a ‘material impact on family owned businesses’, warned Family Business UK, which wants the government to urgently reverse the policy.
Matthew Ayres is a fourth generation managing director at £2m engineering business Bennie Group, which was founded in 1935 by Kettering businessman Peter Bennie, and is very much a family business.
‘Family businesses succeed when we look outward at markets, opportunities, and long‑term value creation,’ said Ayres said: ‘This policy turns us inward, encouraging risk‑averse behaviour and short‑term protectionism.’
The increase in the BPR threshold was seen as ‘positive’ by 40% of respondents, but still a third claimed it would have ‘no impact’ on them. However, the message from the government and high tax burden generally has dented confidence among owner directors.
Neil Davy, CEO of Family Business UK, said: ‘We have seen significant numbers of family businesses cut investment and jobs. Many owners are openly questioning the long-term future of their business.
‘For a government committed to growing the economy this can’t be the outcome it envisaged. At a time when the UK desperately needs the economy to grow, this is the wrong policy at the wrong time.’
It is the larger privately owned family businesses which are the most concerned about the imposition of inheritance tax with the removal of the tax-free BPR position from April.
More than half of respondents (55%) with 10 to 49 employees were worried about the effects of the IHT changes, while this rose to 64% for businesses with 100 to 249 employees. The worst affected companies were those in manufacturing (64%), IT and telecoms (54%); and retail, catering and leisure (52%).
