LABOUR LIFELINING TAX RELIEF ON INHERITED SHARES COULD HIT BUSINESS
Thousands of family-run companies face ruin if Labour scraps a lifeline tax break, a leading business body warned.
The party is reportedly considering making sweeping changes to 'wealth taxes' to boost the coffers for public services if, as expected, it wins the election tomorrow.
These could include inheritance taxes such as business property relief, which was introduced almost 50 years ago.
Under the current regime, shares in private businesses that are passed on to another family member are not taxed.
But if the relief was scrapped, huge tax bills could be slapped on the transfer of shares to other family members if one dies.
These could be so large that businesses may need to shut down or be broken up in order to pay them, according to advocacy body Family Business UK (FBUK), whose members include breadmaker Warbutons and tech firm Rigby Group. The relief applies to shares in firms inherited by children, siblings or spouses.
But it kicks in most often when a parent dies – with some 85,000 family-owned firms estimated to transfer ownership to a new generation each year.
Shadow Chancellor Rachel Reeves is reportedly under pressure from others within her party to also raise capital gains tax as part of an autumn Budget statement if Labour wins the election. But proposals being considered also include inheritance tax changes – including making it more difficult to 'gift' money and assets such as farmland, for example.
About 90 per cent – or some 4.8 million – of all private firms in the UK are family businesses.
They employ around 14 million people and contribute more than £200 billion through tax receipts each year alone.
Sir James Wates, former Chairman of the Wates Group and Chairman of Family Business UK (FBUK), said: 'This puts hundreds of thousands of jobs at risk in a key part of the economy.
'The relief allows companies to plan for the long-term. It raises the question of why someone would put themselves through running a business – as you live and breathe it if your name is above the door – if you face crippling tax bills.'
And Steve Rigby, co-chief executive of technology company Rigby Group, added: 'Whoever forms the next government must avoid policies with unintended consequences that put our businesses at risk. Family businesses are here for the long term.
'Up and down the country we support the communities and local economies in which we are rooted.
'Successive governments, for almost 50 years, have retained business relief which forms part of the Inheritance Tax Regime, knowing that they are the key to unlocking the potential for investment, growth and jobs among family businesses.'
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