The UK is at risk of taking an economic hit of around £29 billion if the government ends tax reliefs for family-owned businesses, according to new analysis.
A report from CBI Economics has warned that removing benefits for owners such as inheritance business tax relief and gift holdover relief could lead to job losses of 391,000 over the next five years.
The analysis is based on a survey of more than 600 family-owned businesses, which found that 30 per cent of respondents would look to reduce job numbers if the tax reliefs are scrapped in the budget. The report also found that 48 per cent of respondents would reduce investment without the tax reliefs and that the measures would lead to a reduction of £29.3 billion in the UK’s gross value added, a key measure of economic activity.
Business property relief is a form of inheritance tax relief for business owners, which grants exemptions on assets passed down to family members or other loved ones, such as shares in a company, land or buildings, and machinery. Gift holdover relief is an exemption from capital gains tax when an individual gives away their business assets.
Rachel Reeves has been examining whether to overhaul inheritance tax rules in her first budget on Wednesday. Family Business UK, an industry lobby group, has cautioned against the tax changes by publishing the economic analysis from CBI Economics.
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Neil Davy, chief executive of Family Business UK, said: “We’ve been highlighting the critical role that business property relief plays in providing a stable regulatory environment for family businesses to trade with confidence, operate on a level playing field with other models of business ownership, and continue to invest in people, jobs, skills, research and development, and new products and services.
“For over 50 years since the policy was introduced by a previous Labour government, business property relief has allowed family businesses to pass on the business to the next generation without punitive taxes, or being forced to withhold capital investment, or sell assets or shares, or be forced to see their businesses or shut show entirely to pay the additional tax bill.
“This would come at the expense of thousands of jobs and livelihoods and decimate communities across the country.”
The Treasury said: “We do not comment on speculation around tax changes outside of fiscal events.”
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