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So, while the rest of us were enjoying a
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well-deserved bank holiday on Easter
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Monday, the tax year quietly began and
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it's not a pretty sight for small
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family-owned businesses. That's exactly
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right. So, as of Monday,
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family businesses will be subject or
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shareholdings in family businesses will
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be subject to inheritance tax for the
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first time in decades. So, under plans
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that were actually first announced at
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the government's maiden budget in back
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inheritance tax will now be levied on
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any shareholding in a family-owned
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over and above 2.5 million pounds. Now,
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that was threshold was 1 million. But
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after sort of months-long backlash that
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came alongside the parallel changes
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being made to family farms, the
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government has raised that threshold to
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2.5 million pounds. So, 2.5 million to a
1:08
lot of people sounds like a lot of
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money, but you've been speaking to
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business owners who say this is still
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going to have quite a detrimental
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>> Yeah, that's exactly right because it's
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the value of the shareholding. The
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company could not necessarily be earning
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a huge amount of money. And so, if
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you're hit by this big bill for 20% of a
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10 million-pound holding in a company,
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generates sort of 5,000 pounds a year in
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profit, then small businesses or or a
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lot of the case, very big businesses
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will struggle to foot that inheritance
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tax bill and it's provoked all sorts of
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concerns that family businesses will
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have to be broken up or sold off. And
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which would be a lot of people are
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arguing would be a bit of a shame.
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>> Clearly, the government have realized
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that maybe the original 1 million-pound
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a little bit too punitive.
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Do you think even with the 2.5 million,
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they're going to potentially realize
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that maybe this goes too far and
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potentially another U-turn down the
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anticipate a U-turn per se, but I do
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think that there will be all sorts of
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second-round effects as a result of
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this, particularly for, as I said, those
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larger businesses that have the value of
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which is further away from that 2.5
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just you think family business, you
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think small sort of estate agent or
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small sort of family-run greengrocer or
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something. Actually, family businesses
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can be enormous. So, I was speaking to
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Sir Rocco Forte, the founder of Rocco
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Forte Hotels, owns dozens of luxury
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hotels around the world, particularly in
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in Italy and in the UK.
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That company's worth billions and
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dollars or pounds. And so, the threshold
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basically is is totally irrelevant to to
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companies like that. And he told me, for
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example, that were he to drop dead
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tomorrow, Let's hope he doesn't.
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yeah, everyone at City AM hopes he
3:25
the company would have to be sell off
3:28
hotels or arms of the business just to
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pay this inheritance tax bill. Do you
3:33
think that longer term this might end up
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costing the Treasury money or or maybe
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not raising as much as they expect? It
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could well do. I mean, I'm not an
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if you speak to people who sort of are
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at the front line of these changes,
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people like Sir Rocco Forte or I was
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speaking to Steve Perez, the founder of
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a drinks brand called Global Brands,
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which makes VKs, which I'm sure you are
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Of course, yeah. In your university
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He was saying that he has
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pulled investment in a factory plant as
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a result of the changes.
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stopped an investment planned in a hotel
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that he owns. Basically,
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because the more valuable your business,
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the more of an inheritance tax bill you
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get. So, if you keep it smaller, you're
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closer to that threshold
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and your inheritance tax bill will be
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less. So, that will pausing that
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investment will mean, obviously,
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property taxes on buying a hotel.
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>> So, they're probably not to grow the
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business. Trying not to grow the
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>> So, that they keep the bill as low as
4:52
possible, which I don't know how that
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tallies with the government's sort of
4:56
going for growth generally, but
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Exactly. Obviously, the the sort of
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extension of that argument is on
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family the the sort of person who's
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going to inherit this business is forced
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sell off bits of it to
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business owner or or company,
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that arm of the business will obviously
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then not pay capital gains tax. It won't
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necessarily pay all these other taxes.
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So, there will be all these dynamic
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effects that mean that while the
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Treasury will be able to bank
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an inheritance tax nice inheritance tax
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as a result of someone dying, there will
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be all these other things that mean that
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perhaps the tax take won't be overall
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tax take won't be as large as as
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>> We could see sort of foreign investors
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buying up our sort of mom-and-pop family
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>> I suppose. Or Dyson.
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They really they really range in size,
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And yeah, that just means uh
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less tax revenue, but it would also
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family businesses that think in
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generations rather than quarters are
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business UK PLC that ministers and
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government like care about employing
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people. They care about
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sort of the sustainable growth of that
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if fewer and fewer of them are actually
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owned by by families, then yeah, that
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will be a big change to to the sort of
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>> Yes, it would be a bit of a shame,
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please do stick with City AM for
6:42
everything you need to know about the
6:43
consequences of the new tax year, both
6:45
for you, business and government and
6:47
everything in between.
