A Taxing Start to the Year: The APR & BPR U‑Turn Explained 🐏

Mark Morton unpacks the government’s last‑minute December changes to Agricultural Property Relief and Business Property Relief, questioning the policy swings, their impact on farmers and businesses, and what it all means heading into the new tax year.

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Transcript

 Hello everyone, it's Mark Morton here. Welcome to this New Year podcast. Happy New Year to you all. I hope you've not put on too much weight sitting there, but no doubt the stresses and strains of self-assessment will soon sweat those extra pounds off. I didn't expect to be talking about the budget again. 

Immediately after Christmas, but in a pretty sneaky move. And it depends how you view life, but I think a pretty cynical move ultimately. It's interesting if any of you out there are aficionados of the West Wing. There was a sketch in there about takeout the trash day when you get rid of bad news in the press cycle, in the hope that nobody will realise. 

I, I think pretty interesting that, a major shift in policy about APR and BPR was announced on the 23rd of December when you were either already hungover from your Christmas party or heading to it. And after the changes announced in the budget, which was only what, a month before. Which I would suggest was a u-turn, if we can use that term. 

Another U-turn. What happens if you u-turn after a U-turn? I think you've gone full circle, haven't you? And that kind of sums up in many respects what has been going on with a PR and BPR. Pressure release came out on the 23rd of December. Happily announcing that spouses or civil partners will be able to pass an up to 5 million pound of qualifying agricultural business property. 

Now let's just stick with the figures for a minute. It was originally 1 million per person, but not transferrable between spouses and civil partners. Government ministers came out at the time and talked about a 3 million limit. Well, of course what that was two lots of a million plus two nil rate bans, plus two residential nil rate bans. 

So if you use the same logic what we're actually talking about here is 6 million rather than five. For married couples and civil partners presumably. You know, pretty confusing. Not entirely clear why. I mean, the press release said the government has listened to concerns. I suspect what they listened to was Farmers Blockading London. And it was interesting. I saw an interview with a farming representative after the budget and basically saying, you know. A million quid. Now transferable between spouses still isn't addressing the issue for family farms, and we don't want to get militant. But, and I guess if you've got threats of not conducting harvest, or not delivering milk or driving extremely slowly, and a tractor down the M 11, you know, the government have been forced to concede. 

And it's quite interesting when you look at the comments in there. The government is going to further to protect more farms and businesses while maintaining the core principle that the most valuable agriculture and business assets should not receive unlimited relief. Now, of course, the real question within this has been what is the point of these changes? 

I think, you know, what are the government seeking to achieve? Are they worried about extremely wealthy people sheltering their wealth in something which purports to be a form? Well, I mean, if it's not a farm, then you get no relief. So if it's a hobby, you know, then let's address that point. And in the good old days when I was a tax inspector working in a farming district, if you weren't sure, you just drove to the farm and said, you know, you've got a hundred acres and two sheep, that's not farming. 

You know, so if that's the issue, let's address that. I can kind of have a little bit of sympathy with. Big houses on farms rather than farm houses, you know, where do you draw the line? 'cause I can't pass down my palatial residence to my family free of IHT. So is there a, you know, is that part of the issue? 

You know, it, if you understood what the government's concern is here, then of course you would be able to more readily address it rather than just use monetary limits to gloss over. The point, and it's quite interesting as well, I'll be interested to see what the legislation is ultimately amended to. 

Because one of the concessions that have been made in this string of, you know, changes on a PR and BPR was that the limit would be indexed from a point in time. Now, are they suggesting that the 5 million will also be indexed in due course or not? And again it's like a half cocked press release. Not really very technical. 

So we will see ultimately what the legislation ultimately provides. But again good news it's just a shame that you know, all the angst and upset and stress and whatever else may have gone along with it. We've all heard stories of what some farmers either had done or were suggesting to get round these changes. 

It's a shame that this couldn't have been thought through in the first place, to have saved that year plus of stress and strain. And of course, I would guess quite a lot of you would have farming clients who have already entered into arrangements based on the rules as originally proposed to try and circumvent the changes, whether that was using or whatever else. 

Now, of course, that's all well and good, but maybe they didn't need to have done it. So clients have incurred time, costs, stress, strain, whatever. When actually for some of them, the 5 million limit takes away the whole problem for some of them. I appreciate It doesn't and just to finish, I suppose, you know, the I did hear Mr. 

Dyson talking, trying to explain this to the general public saying, you know, the difficulty here is leaving aside agricultural property. If I've got shares in a valuable company and want to leave them to my family members. Then of course the question becomes how are they gonna pay a shed load of IHT when what they have is shares and that has business consequences. 

And I think this is, you know, exactly the same point with farmers. This is what the government have failed to appreciate, that actually this may drive business behavior, whatever that behavior is, whether it's planning, whether it's avoidance, whether it's, you know, actually we'll just cease this business then, you know, whi, which is he is not helping businesses. 

We've had a lot of, I wouldn't say anti, but pretty business negative policies in the last 18 months. Not encouraging growth, not encouraging businesses to take that risk to get started and to grow. And this change really doesn't, you know, it, it preserves the status quo. For some people, it certainly doesn't encourage investment to any extent. 

You know, it's like the government say, oh, well we've addressed the issue. Who caused the issue? Oh, you right, okay. Then, you know, it's, it just smacks of whatever words you want to use in competency or naivety or lack of understanding or whatever it may be. I certainly still don't think this is the end of the saga, to be quite honest. 

So anyway, on that happy note, bit of an update on agriculture and business property relief. If you if you want to join us, the detail of this will be in our Finance Act courses from May onwards. That's, you know, the legislation one would imagine will be passed by Easter. I do a bit of writing over Easter and knock out a hundred page set of notes. 

Please feel free to join us. You know, hopefully I'll be seeing some of you face to face over the next few months or alternatively on Zoom. Take care everybody and yeah, speak to you again soon. Cheers.