There is no growth agenda for Yorkshire without family businesses.
Thomas Martin, Chair Arco Ltd and the Yorkshire Regional Business Engagement Board
Right across Yorkshire, home-grown family businesses are wondering – what just happened? In 76 minutes, the Chancellor delivered a Budget that undermines hundreds of years of family business ownership in our region.
Yorkshire has a proud history of family businesses. The deep-seated values that we prize of hard work, responsibility, respect, community spirit run deep in businesses like mine, which has been trading in family ownership for 140 years.
Others like AW Hainsworth have been doing the same for 240 years, Bettys & Taylors 105 years, Howarth Timber 184 years. The list goes on.
But in the Budget the Chancellor put all this under threat by changing long-established policies that support us.
For the first time in almost 50 years, family businesses across Yorkshire will be subject to Inheritance Tax when the owner dies – something that is forcing many to wonder whether they will ever be able to pass on their business to their children. And whether their children will be able to afford to take them on?
Don’t get me wrong, I’m not arguing that family business owners shouldn’t pay their fair share of tax. We already do. Britain’s 4.8 million family businesses contribute more than £200 billion in tax every year – about a quarter of all taxes received by the Government.
But let’s be clear, for someone inheriting a family business, they are not taking on a prized Ming vase, family heirloom or nice house. It is the fabric of business. Family famers too are facing exactly the same threat. The tools of their business will also be taxed when they are passed to the next generation threatening food security and environmental management as assets are used to achieve maximum economic return.
The problem is that whilst Inheritance Tax is a tax on the individual, in the case of family businesses it becomes a direct cost to the company.
Take an average business valued at £8m, a family member inheriting it will now be expected to pay 20% tax on that (minus the first £1 million) to take it on when the owner dies. Not many people have that kind of money kicking around and so they will need to take a dividend from the company. That will be subject to additional tax rate of 39.5% meaning companies will be double taxed.
The cost will ultimately be paid through reduced investment, less growth, fewer jobs and more redundancies as companies divert money to cover a future tax liability. In worst case scenarios, neither the business or family member can pay the Inheritance Tax and will be forced to sell the business, or parts of it.
When you add on the massively increased burdens this Government is placing on business through increased employers National Insurance contributions, new employment legislation and minimum wage, the changes to Inheritance Tax are draining what little confidence we had left.
Business needs confidence. It imbues a sense of certainty that underpins the very nature of private enterprise, allowing companies of all sizes to take risks and invest in both their communities and people to generate long-term prosperity.
Home-grown family businesses do that better than most. We aren’t ‘here today gone tomorrow’ fly-by-nights. We take pride in what we do. It is our name above the door and we work hard to protect that whilst respecting our employees and the communities we serve.
The sheer bloody mindedness of Yorkshire folk has done them proud for generations. The fact there are so many long-established family businesses here in Yorkshire is testament to that. We are a proud county with a rich history.
But in a 76 minute Budget speech the Chancellor has unwound hundreds of years of patient planning and investment that will likely result in lower taxes, lower growth and lower employment.
I cannot believe this is what the Chancellor had in mind when she announced the closing of what she and others have called a “loophole.” As the Chairman of a long-established family business, and a director of Family Business UK, I am calling on the Government to consult with us to reverse this change and protect our proud heritage of family business.
END.
This article originally appeared in the Yorkshire Post on 14th November 2024.
Find out more about FBUK’s Back Family Businesses Campaign here.