The Chartered Institute of Taxation (CIOT) has urged the government to implement
a transitional rule to allow older farmers and other business owners to gift
assets to the younger generation free of Inheritance Tax (IHT) before changes
take effect in April 2026.
Current rules incentivise farmers to keep their farms until their deaths, the
CIOT stated in a submission to an inquiry by the House of Lords. Its proposed
changes would reverse these incentives and promote lifetime giving.
However, for older farmers where there is a risk that they could die within seven
years of making a lifetime gift (but after April 2026), the gift would be
ineffective for IHT purposes. According to the CIOT, a 'cliff edge' is thus
created on 6 April 2026.
It has suggested that the risk could be mitigated by amending legislation so that
any gifts of relievable assets made between 30 October 2024 and 5 April 2026
would continue to benefit from the old rules even if the farmer died within
seven years.
John Barnett, Vice President of the CIOT, said:
'We are concerned that bringing in changes to agricultural and business
reliefs with a cliff-edge date of 6 April 2026 is leading to great anxiety
among older clients as they are unlikely to survive seven years and
therefore are unlikely to see making gifts as a solution.
'We think that there is a straightforward and relatively low-cost
transitional rule that could address this concern: allowing gifts made
between now and April to continue to qualify for the 100% relief currently
available.
'While this is not a complete solution to the problem – there may be some for
whom making a gift is impractical or impossible if they have lost capacity –
it should significantly reduce the risk as it gives a viable and
straightforward alternative.'
Internet link: CIOT