Family business leaders across the nation are struggling to come to terms with the devastating impact that the recent Budget will have on their businesses, with the increased levels of National Insurance Contributions and changes to the National Minimum Wage directly impacting their bottom line and the longer term challenges and uncertainty they now face in light of the changes to Business Relief and the impact on future inheritance tax.
These changes come on the back of years of economic uncertainty and a pandemic, the impact of which continues to have an impact on family businesses the length and breadth of the UK.
Family Business United (‘FBU’), a leading voice for the family business community in the UK and beyond is calling for the Government to review their position and reverse the decision in respect of Business Relief, also known as Business Property Relief.
Family businesses are the backbone of the UK economy. Many have been owned by families for generations where each new generation has taken on the mantle, invested in the business and its people, and innovated, creating sustainable businesses for all our futures. Until now, the reliefs available for the passing of shares from generation to generation has enabled them to continue to build on the work of those going before them, seeing themselves as stewards of the business for future generations. Now, with the £1 million cap to Business Relief and the remainder of the value of the shares passed on becoming subject to Inheritance Tax, family business leaders are being faced with difficult decisions, an extraordinary short term challenge to plans that normally take decades to manage with no transitional phase. The £1 million cap will in some instances be sufficient but for larger businesses with a significant workforce the prospect of downsizing to meet a tax bill will be economically devastating for all involved.
As Paul Andrews, Founder and CEO of Family Business United explains, “Despite all of the lobbying by many organisations before the Budget was announced, the Government clearly does not understand the impact of these changes which may result in family businesses being forced to sell in order to meet new inheritance tax charges, changing the very essence and nature of the businesses and affecting the livelihoods of hundreds of thousands of employees, many of whom will have also had previous generations who have worked for the family firm.”
“The impact of the proposed changes has not been thought through nor the true impact of the proposals understood.”
“Family firms are significant employers, income generators and wealth creators, not to mention the support they provide to the communities in which they operate. and they already pay significant taxes on the performance of their businesses, and associated taxes that come with employing so many of the working population."
"The proposals for Business Relief are not sustainable for many and whilst the Government may see it as a way to raise further funds there will undoubtedly be serious unintended consequences as a result.”
FBU is calling for the Government to look again at the figures and the serious economic impact that the proposals will have. Family businesses that close will no longer be making any contribution and those that continue will be forced to cut back on investment and capital expenditure, hindering growth ambitions, whilst trying to meet their other obligations as good employers, not just doing business but doing it the right way for the good of all working people.
Family firms are the bedrock of communities around the country and these changes jeopardise their long term survival which has to be a concern for communities who, in many cases, would not fare well from the loss of a key, local employer.
FBU wants MP’s to understand the consequences of the new inheritance tax policy fully, which is why we are mobilising our members and the broader family business community to seek their reversal. The new Family Business Matters campaign will be a way for the community to come together to call for change and we are encouraging family businesses across the country to join us in making their voices heard.
“There’s still time for the Government to accept they’ve got this wrong, and my message to Ministers is that they should do the right thing and reverse this awful Family Business Tax,” concludes Paul.
FBU is urging all family businesses to write to their local MP, the Chancellor of the Exchequer and to support our media campaign to create a voice for change because #FamilyBusinessMatters, and we will shortly be distributing a pack to help them get involved.
In addition, FBU has created a petition calling for the Government to abolish the 'Family Business Tax' which can be signed here
Get in touch with the team at FBU to find out more.
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