The ATT has called for a targeted and proportionate approach to the abuse of Business and Agricultural property relief report Harris & Co accountants Northampton who advise new start up businesses and small and meduim sized businesses.
Its plea was issued in the wake of the Finance Bill’s proposals on the treatment of liabilities for inheritance tax (IHT) purposes - designed to tackle abuses - that it fears are ‘over the top’ with the potential to have ‘significant implications’ for business owners.
The bill includes provisions that can radically alter the basis of calculating the amount of IHT payable on an individual’s death. The proposals apply where an estate includes both assets that qualify for Business Property Relief (BPR) or Agricultural Property Relief (APR) and a borrowing that was used to fund their acquisition. The institute has flagged that the bill’s explanatory notes reveal that the provisions are designed ‘to remove the tax advantage that is achieved by arrangements which exploit the current provisions’. The ATT fears this ‘broad brush approach, which catches innocent and guilty alike, will be counterproductive’.
Yvette Nunn, ATT president, said: ‘We strongly support attempts to stem exploitative behaviour; however it seems that HMRC have become convinced that any borrowing that is linked to the acquisition of an asset that attracts BPR or APR is necessarily artificial or abusive. That simply isn’t the case and the indiscriminate attack on liabilities linked to BPR and APR assets could damage confidence in their provision.’
She said one ATT member had told her that over 50 businesses on her office’s client list with normal commercial borrowings would be stung by the legislation.
‘Many business owners have incurred perfectly normal commercial-based borrowings in the course of acquiring assets that qualify for BPR and APR,’ she continued. ‘Some of these liabilities will have been in place for many years but, if the business owner dies after the Bill comes into law, the liability will be automatically matched with the relevant asset. The effect will be that the existence of a perfectly genuine liability will be completely ignored in establishing the taxable value of the estate.
‘This broad brush approach is over the top. If there is abuse it should be the subject of a targeted approach to counteract it.’