Removing BPR could cost Billions
New research commissioned by Family Business UK shows that £29billion and 391,000 jobs could be lost from the economy if policies that support family businesses are removed.
The findings come from CBI Economics, which was commissioned by FBUK to model the impact of removing Business Property Relief and Gift Holdover Relief.
Both BPR and GHR have been the subject of intense speculation ahead of the Budget, with reports they could be removed or reformed.
But data from CBI Economics suggests that removing the policies could have serious, long-term economic consequences with:
- 48% of family firms reducing investment
- 30% reducing headcount
- 24% expecting lower turnover
- 16% suggesting they would be forced to sell-up to pay an Inheritance Tax charge
- 347,000 micro businesses and sole traders could be forced to close.
Neil Davy, CEO of FBUK said: “This research shows the detrimental impact removing BPR and GHR would have on investment, employment and receipts into the Treasury. It would undermine the economic growth and long-term prosperity the government has committed to deliver, and which family businesses want to support and contribute to.”
The Government’s stance on BPR and GHR has been unclear for months with suggestions that removing BPR could raise money for the Treasury at a time when public finances are stretched. However, our research suggests that removing them could actually cost the Government money.
The modelling shows that over the next 5 years, scrapping BPR and GHR could raise £7.4bn for the Treasury BUT it could result in an £8.4bn decrease in tax revenue caused by the reduction in family business activity and the wider negative impacts on the UK economy”.
Neil Davy continues: “We’ve been highlighting the critical role that BPR 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, R&D and new products and services.
“This new research shows the unintended consequences of removing the policies that support family businesses. Doing so would be a self-defeating move by any government elected on a mandate to deliver long-term economic growth and prosperity.”
Dr Peter White, Managing and Technical Director of Nova Laboratories, a Family Business UK member, added:
“After eighteen years working in the NHS, I started Nova Laboratories from nothing. Thirty years later, the Company has a global reputation, employs 280 local staff, and next year will export 65% of our products and services.
“The financial certainty provided by both spousal relief and Business Property Relief allowed me to re-invest everything back into the Company, rather than accumulate my family’s personal wealth. Over 95% of my family’s paper wealth is therefore in the Company’s shares, and not in personal assets or liquid cash. This approach allowed the Company to grow steadily and sustainably, and my son has spent a decade in the business developing a 20-year plan for its continued growth and success.
“Unless both these reliefs are maintained in full, the incentive to create and grow a successful business, continually re-invest in the business, and provide smooth and stable succession will be completely lost in the UK.”
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