FBUK Policy Director Matt Jaffa examines a key House of Lords report into inheritance tax reforms and finds that it echoes 15 months of warnings from Family Business UK
The House of Lords has published its report into the inheritance tax changes announced in the Autumn Budget 2024 – including changes to BPR and APR.
The 109‑page inquiry report: Inheritance tax measures: unused pension funds and agricultural and business property reliefs, and its conclusions echo many of the arguments FBUK has made over the last 15 months. Having given written and oral evidence to the inquiry, FBUK receives 12 name check references in the report.
In short: the Lords agree with what FBUK and our Members have said:
- the policy is ill-considered,
- lacked prior consultation
- risks damaging the UK’s family business sector.
Commenting on the report, FBUK CEO Neil Davy said:
We welcome this report and urge the Government to immediately implement all its recommendations on BPR and APR. The damning criticism of the Government’s processes in formulating these policies highlight serious shortcomings which can only be properly addressed with a full consultation with family businesses and reversal of this damaging policy.
The fact the Lords acknowledge that these deficiencies result from the Government’s failure to properly consult with us and family businesses across the country before announcing the measures, shows precisely why and how the Government got this wrong.
Whilst we welcome the Government listening to arguments we have put forwards and the subsequent amendments it has made to these policies, they do not go far enough to protect thousands of jobs and hundreds of millions of pounds worth of investment delivered by British family businesses.
This is now the third high-profile committee in Parliament to reach a conclusion that this policy is deeply damaging to the family business sector which employs more than 15 million people and makes a significant contribution to the economic success of the country.
The Government must heed these warnings and reverse these policies, before they are implemented in April, to give Britain’s family businesses back their confidence to invest for the future and deliver the growth that remains this Government’s number one priority.
Some key takeaways from the report:
Unrealistic Deadlines
The report is clear: forcing estates to make their first Inheritance Tax payment within six months, including tax on unused pension funds, simply isn’t workable. The Committee recommends extending the deadline to 12 months.
The Committee found that Personal Representatives (PRs) and Pension Scheme Administrators (PSAs) lack the full information needed to calculate IHT accurately. Its message to Government is not to prioritise an April 2027 start date over getting the policy and the processes right.
BPR & APR: Government failed to assess the impact of the policy on family businesses
The Committee questions why the Government did not carry out a full impact assessment before announcing the policy change – a concern FBUK has raised repeatedly.
The Committee recommends cross departmental research (to include the Department for Business, Department for the Environment, Food and Rural Affairs and HMRC) to fully understand the consequences of the reforms.
The report calls for Government to measure the impact of the reforms over the next seven years. FBUK believe that seven years is too long a period of time, which for many family businesses with older owners, is not practical.
Impact of a death on company valuations.
In his oral evidence to the Committee, Steve Rigby, Chair of FBUK, warned of the devastating effect the sudden death of a key individual can have on the valuation of a business. The Committee has now taken this on board and is calling on the Government to examine this issue.
Valuations system not fit for purpose
FBUK highlighted that valuations can vary wildly between assessors, creating delays and financial risk for families trying to meet IHT deadlines.
The report urges the Government to assess levels of staffing and expertise within HMRC’s valuation teams before April 2026, given the expected surge in administrative workload.
This report is the third major Parliamentary committee, alongside the Environment Committee and the Welsh Affairs Committee, to question the Government’s approach to these policy changes.
As the Finance Bill makes its way through Parliament to pass the legislation, this report will give Members of Parliament extra ammunition to press the Government for further changes to the policy.
What happens next?
FBUK will be analysing the full detail of the report and briefing the Government in the coming days, but our position remains unchanged: we continue to call for a full reversal of the policy.
At the bare minimum, a comprehensive review is now essential to design a fairer, more workable system that protects jobs, growth and the long term resilience of the UK’s family business sector. And we will continue to put the voice of Members to Ministers and Parliamentarians as the Finance Bill continue its journey through the legislative process.