New ‘Tractor tax’ blow to Starmer as Labour knowledgeable calls for presidency U-turn | EUROtoday

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

Labour-supporting tax campaigner Dan Neidle says the Budget resolution to cost loss of life tax on household farms value over £1m ought to be dumped in favour of a £20m threshold.

It would take away at a stroke the specter of farmers who wish to cross on their farms to their kids being compelled to promote as much as pay a large tax invoice, mentioned Mr Neidle. Instead, 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 simple” blueprint to finish the row is “workable”, he mentioned it was time for all involved to do some “proper thinking” 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.

National Farmers’ Union (NFU) president Tom Bradshaw advised The Independent: “Having seen one of the staunchest advocates for her tax change his mind, it would be nice to think the chancellor and those who came up with this mess will look again.”

Mr Bradshaw praised Mr Neidle for his “willingness to look again at the impacts of this tax”.

He added: “Having done so, he saw that the policy is badly thought out, cripples family farms not tax avoiders, and will have a devastating impact.”

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, because of take impact in 2026.

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

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

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

He has gained reward previously for investigations into tax fraud by his non-profit-making Tax Policy Associates group.

Under Mr Neidle’s new proposal, there could be a twentyfold enhance within the stage at which IHT kicks in on farmers.

Instead of the £1m in Ms Reeves’s Budget, he says it ought to be £20m – and that this is able to successfully save all household farms.

“With this change, IHT would have no impact on a family farm succession planning, if the farmer’s heirs continue to own the farm,” he mentioned.

“We’d be taxing farmers a lot less, but IHT-exemption-chasing investors a lot more. All in all, the revenue difference for the Treasury is likely [to be] small.

“The farmers and tax advisers I’ve spoken to think this is workable. The question is whether the current political noise creates any space for proper policy thinking. Let’s see.”

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

It comes as Labour MPs have privately advised The Independent that they can not perceive why Labour picked a battle with farmers and rural communities for a tax which raises simply £500m a 12 months.

It is known {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.

In addition, the revered Institute for Fiscal Studies (IFS) suppose tank gave proof to the Commons setting, meals and rural affairs committee during which it appeared to criticise the federal government’s proposals.

While the coverage had been developed to cease rich individuals like entrepreneur Sir James Dyson from utilizing the loophole to keep away from inheritance tax, David Sturrock of the IFS accepted it’s “very likely that this change will affect family farms on any reasonable definition”.

In its report, the IFS mentioned: “In some cases, the farm will simply yield too little income (and the inheritor will have too few other resources) to pay the tax. The owners might choose, or be forced, to sell part or all of the farm. This is a feature of inheritance tax: the same applies to those inheriting a family home, for example.”

The Treasury has additionally come underneath fireplace for not finishing up an influence evaluation into the impact of the coverage whereas claiming it is going to solely have an effect on round 500 farms a 12 months.

The NFU estimates that in actuality, will probably be between 2,000 and a pair of,500 a 12 months, which might imply that over 30 years, as many as 70,000 farms might be impacted.

The NFU additionally seized on Department for Environment, Food and Rural Affairs (Defra) figures which steered 60 per cent of farms might be hit. This is disputed by the federal government which described it as a “misreading” which excluded tax allowances.

In its report, the NFU said: “Looking at sector impacts, the tax charge resulting from a £1m threshold would wipe out returns for an average cereals farm and around half of returns for average dairy farms. Considering typical historic returns on an average cereals farm and factoring in the reduction in direct payments, a farm making a profit of £34,000 will be hit with 10 annual IHT instalments of £53,000, over 1.5 times its profits. Even at a £2m threshold, the annual tax payments of £33,000 would equal farm profits.”

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 items which have to be stripped out to calculate the true variety of farms affected. Second, it solely checked out agricultural property reduction and never enterprise property reduction of their calculations. Finally, the NFU claims the federal government ignored the double-digit proportion development in agricultural land worth since 2021-22.

This signifies that the Treasury’s declare that about 28 per cent of farms might be affected is flawed in line 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 Independent: “My figures changed downwards but the debate about the figures is a bit of a distraction in my view (and the NFU agree with that). The question is how the rules should work.

“I’m not asking the government to back down. I’m asking them to double down and achieve their aim of stopping IHT avoidance more effectively. At the same time, that protects family farms. It’s win-win.”

A Treasury spokesperson mentioned: “Our commitment to farmers remains steadfast – we have committed £5bn to the farming budget over two years, including more money than ever for sustainable food production, and we are developing a 25-year farming roadmap, focusing on how to make the sector more profitable in the decades to come.

“Our reform to agricultural and business property relief will impact around 500 estates a year. For these estates, inheritance tax will be at half the rate paid by others, with 10 years to pay the liability back interest-free. This is a fair and balanced approach which fixes the public services we all rely on.”