Gauke: UK govt won't remove inheritance tax relief for family businesses

The British government doesn’t plan on changing inheritance tax support for family businesses, despite a recent report from one of the country's top universities recommending the removal of business property relief. 

At a meeting with UK lobby group the Institute for Family Business, exchequer secretary David Gauke said that when the Office of Tax Simplification reviewed the country’s tax reliefs recently, it didn’t recommend removing BPR for inheritance tax.

Under BPR, next-gens who inherit a stake in the family business do not have to pay a succession tax. The relief is crucial to growth, IFB said, and if removed would increase sales or liquidations of family businesses.

“We are encouraged by the minister’s response that BPR is seen as a tax policy that provides encouragement to the family business sector,” Grant Gordon, IFB’s director general, said in a statement.

“BPR needs to be retained in full as its removal would have a devastating impact on growth of successful family businesses, and on investment in the sector,” he added.

A report by the London School of Economics for the UK's Department for Business, Innovation and Skills in November called for the removal of the relief, arguing this could incentivise family business owners to reconsider their business structure and bring in professional managers, as well as increasing government revenues.

But in a submission to the Treasury last year, the IFB said BPR “facilitates the transfer of family management and ownership of the businesses between generations” and allows “a long-term approach which focuses on stability and sustainability”.

It added: “In the absence of such relief ... the inheritance tax, which any successful business would attract, would almost certainly require a sale, liquidation or substantial borrowing. The death of a major shareholder could bring a profitable business to an end.”

Ross Warburton, IFB chairman and a fifth-generation member of family-owned bakery company Warburtons, said that without BPR, his family “would have been forced to sell the business and would not have been able to pay the inheritance tax duties after the deaths of the previous generation of owners”.

He added that its removal “could lead to the premature transfer of ownership to the next generation, before they fully understood how to be responsible owners”.

Family businesses account for two-thirds of the UK's private companies, according to the IFB’s latest research, produced by Oxford Economics. In 2010, they contributed £81.7 billion (€92.8 billion) in tax receipts, or 14% of total government revenue.