Family-owned enterprises are accusing the Labour Party of dishonesty regarding its proposed tax reforms, with warnings that potential alterations to inheritance tax reliefs could jeopardize the survival of these businesses and undermine British industry.
According to a recent survey conducted by Family Business UK, four out of five family-run businesses believe the Labour Party has misled the public about its tax policies. The key concern revolves around potential changes to longstanding tax reliefs, specifically the business property relief. This relief has historically allowed families to transfer business assets with reduced or eliminated inheritance tax, a benefit that could be at risk.
Neil Davy, Chief Executive of Family Business UK, has voiced serious apprehensions about Labour’s tax proposals. He highlighted that these changes could pose a significant threat to family-owned businesses, which collectively employ 13.9 million people and contribute over £200 billion annually to the UK’s tax revenue. The organization’s research suggests that reductions in tax reliefs could force many family businesses to halt recruitment or liquidate assets to cope with the increased financial strain.
The most troubling projection is that one in five family businesses might be compelled to shut down or sell off assets to manage inheritance tax obligations if business property relief is diminished or eliminated. This relief, which has been a staple for decades, offers a full or partial reduction of the 40% inheritance tax rate on business transfers across generations.
Davy also criticized the government for fostering uncertainty, stating that many family businesses are postponing vital investment decisions while awaiting clarity on these tax policies, which are set to be addressed in the upcoming budget on October 30.
The survey, carried out by Censuswide, revealed that over a third of family businesses anticipate significant tax increases in the forthcoming budget. In response, 27% of businesses are planning to freeze recruitment, 12% are considering layoffs, and a quarter of respondents indicated they would pause key investments.
Family Business UK, representing 200 of the UK’s largest family firms, including Wates, NG Bailey, Bettys and Taylors of Harrogate, and Rigby Group, is urging the government to preserve the current tax reliefs. The association argues that maintaining these reliefs is crucial for protecting family-owned businesses and sustaining their substantial contribution to the UK economy.
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