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Family firms accuse Labour of dishonesty over tax plans, warn of threat to British business

September 25, 2024

Family-owned businesses accuse Labour of dishonesty over potential tax hikes, warning that changes to inheritance tax reliefs could force closures and threaten British enterprise.

Four out of five family-owned businesses have accused the Labour Party of misleading voters about its tax plans, according to a survey by Family Business UK.

The trade association has expressed serious concerns over potential changes to longstanding tax reliefs, particularly business property relief, which allows families to pass on business assets with reduced or no inheritance tax.

Neil Davy, chief executive of Family Business UK, warned that Labour’s tax policies could endanger the future of family-owned enterprises, which employ 13.9 million people and contribute over £200 billion annually in taxes. Research by the organisation suggests that many family businesses could face severe consequences if tax reliefs are cut, with some being forced to freeze recruitment or sell off assets to manage the increased financial burden.

The most alarming finding is that one-fifth of family businesses may be forced to close or liquidate to pay the inheritance tax charges if business property relief is reduced or abolished. This relief, which has been in place for decades, allows businesses to be transferred across generations with either a full or partial reduction in the standard 40% inheritance tax rate.

Davy also criticised the government for creating uncertainty, stating that many family businesses are delaying crucial investment decisions as they await confirmation on the future of these tax policies in the upcoming budget on October 30.

The survey, conducted by Censuswide, found that over a third of family businesses expect significant tax hikes in the budget, with 27% planning to freeze recruitment and 12% considering redundancies to cover rising costs. A quarter of respondents indicated that they would pause key investments.

The association, which represents 200 of the UK’s largest family firms, including Wates, NG Bailey, Bettys and Taylors of Harrogate, and Rigby Group, has urged the government to maintain the current tax reliefs to protect family-owned businesses and their contribution to the UK economy.