Fifth, it’s usually very bad news for a business if the next generation does take over. Look at Trump, Murdoch, the Daily Mail and Succession for all the evidence you need on that.
Trump did not take over the family business – he got cash. Murdoch did take over the family business, “The News” in Adelaide and built it into something of a globe bestriding colossus. The Harmsworths seem to have carried the Daily Mail well enough through four generations. And Succession is, of course, a TV series, not reality.
So, erm, not a lot of proof there really.
To people like Ritchie, Succession is a documentary, not a fictional dark comedy.
Are you sure it wasn’t the Adelaide Advertiser?
Anyhoo: a friend of ours sold the family business in the mid 70s, its having flourished since 1810. In other words it lasted longer than the Kingdom of Great Britain did, longer than the United Kingdom of Great Britain and Ireland did, and longer, so far, than The United Kingdom of Great Britain and Northern Ireland.
Longer than all our universities with the exception of the six “ancient” ones, Durham, and UCL. Longer than the Labour Party. Longer than the Football Association, the Rugby Union, the England cricket side. Etc, etc.
It lasted longer than each of the five French Republics so far, the Kingdom of Italy, the Second Reich, the Third Reich, the Soviet Union, …
You could say it lasted longer than the First Republic of the USA (i.e. up to the Civil War), the Second Republic (up to President Wilson), the Third Republic (up to FDR), and, so far, the Fourth Republic.
The blog on the cesspit that is TRUK from which this came is headed
“A modest inheritance tax charge on business assets might be good news for smaller companies
Posted on November 1 2024”
No blog or comment by Murphy has made me angrier than this one. This alleged ex-accountant and tax adviser shows absolutely no understanding or empathy with small business or farming. I find it, to use Murphy’s favourite words, staggering and astonishing (candidly), that a man who practised in Downham Market which is a heavy farming area should be so ignorant, so bitter and so avaricious of small businesses. He trumpets his vast experience running and advising small businesses yet shows absolutely no knowledge whatsoever of them, unless it’s the fvcking luvvies who were his clients in Wandsworth.
Frankly if I met him today, I’d deck the cvnt and then kick his fvcking head and bollocks into a pulp.
Wondering about “Look at Trump” – global business, got his name on skyscrapers & luxury properties, super model wife, private jet, etc.
What point was he trying to make here, exactly?
“Trump is a loser,” said the man seething at canal boats.
Antony Bamford inherited JCB from his father aged 30 and took a business with one factory turning over £4-5m and built it into one with 22 factories around the world and that turns over £6.5bn.
Most farms are family businesses passed down from father to son for generations. Generally it’s a pretty successful process. Sadly it’s a tradition that is doomed by the IHT change in the budget. Farms are asset rich but cash poor. The only way to pay the bill is to sell off a big chunk of land which leads to what’s left becoming less and les economic to farm.
I think the last season of Succession I watched was 3. Whichever. It was the one where the entire script of every episode was just endlessly repeated “Nyaah, fuck you!” “Nyaah, fuck you!” “Oh fuck off, all of you!”
Did it get any better after that?
Andyf,
What’s the endgame for this change to IHT – even Reeves can’t have been so thick as to not realise what would happen to family farms. Is it to deliberately break them up so they can be bought by the state to be farmed collectively?
@Jimmers
Most likely the farms will be bought by large Agribusinesses who will want to create large scale farms. If not that, then by companies wanting to build solar or wind farms. To be honest, it would not bother the government if the UK got out of farming altogether making Britain import most of its food. Singapore imports more than 90% of its food and I suspect the establishment would not mind the Uk doing something similar.
The Labour party does not really like small businesses. It is easier for them to deal with a few large businesses than having to deal with a large number of smaller businesses.
@Bloke in Germany
I have never watched it.
Some family businesses don’t do well through inheritance THEREFORE the grasping maw of the State should take much of it to spend on diversity consultants, paying people to stay at home, paying people to look after the people staying at home, paying other people to give things to those who stay at home, paying other other people to make power to allow those staying at home to watch tv and have the heating on all day. Oh and maybe some other things the state should do like defence of the realm.
Jimmers – I watched one episode and it was full of vile people being horrible to each other.
Not sure if they were going for black comedy like The Thick of It, but Armando Iannucci is a better writer.
There is a Freakonomics thing that says that roughly speaking, letting the kids take over is a bad idea.
I really wanted to follow my father’s career path, but by the time I came along, walking through France, the Netherlands and Belgium into Germany killing and maiming every Nazi socialist bastard I saw had gone somewhat out of fashion.
Wouldn’t mind having the chance to do the same in Westminster, mind.
Andyf
A lot our clients take out life insurance to the tune of whatever the projected IHT bill will be, as you can’t sell any of the estate at death to pay IHT. My own father didn’t believe this to be true and had to get a loan to unlock his mothers estate the daft twat.
Steve
Agreed – throughly depressing TV. Couldn’t watch it
This is another one of his posts where he looks at people who have the success he think he deserves and bitterly pisses on them. With added bile because he’s got nothing to pass to his children other than the family grant grifting business and a toy train set
Sebalto – at least it wasn’t Baby Reindeer.
You could probably catch an STD from watching that.
“Is it to deliberately break them up so they can be bought by the state to be farmed collectively?”
No, even the likes of TTK isn’t so stupid as to think that would work. Imagine your average council public works team running a farm, with all the usual public sector overmanning, laziness, work to rule, regulatory overkill and woke bollocks piled on top of the concept of ‘This has to be done NOW even if it means working all night because its going to piss down tomorrow and the whole years work will be ruined’ and you’d find farming production through the floor and what was produced would cost ten times what it does today. Just as the USSR found out.
If I was of a conspirative bent I’d say the plan behind it would be to force as many farmers off their land as possible, end food production, especially of livestock, and make that land available for large financial institutions and wealthy individuals to buy cheaply and cover it in trees or ‘rewild’ as a contribution to Net Zero.
Three bad examples and a fictional one is “usually”. All hail the Spud!
Jim: The idea is to get farmland sold to huge agribusinesses, as Salamander says, so that they’ve got a new bogeyman to “save” us from. Remember Mencken on “practical politics”.
I get there’s a thing called deadweight costs or losses from taxes, especially transaction taxes. But is there a term I wonder to describe and calculate the losses to the economy from compelled sales, such as when you have to sell all off your landholding to pay a tax bill amounting to around one-fifth of it, and more importantly do it within a time limit.
It looks like you’re selling the family farm.
Would you like help?
* Get a derisory offer for the love, sweat and toil of generations
* Just sell the farm without help and commit suicide
☐ – Don’t show me this tip in the grave
v
ಠ_ಠ
The WEF want all small farms / farmers gone, hence the EU drive to get 3000 small farm holders off the land in the Netherlands. None of these measures are by accident.
All government ‘taxation’ is theft, pure and simple.
Approaching from the other direction as a consumer-side Devil’s Advocate, aren’t large farms more efficient than small farms, so shouldn’t it be in the interest of the consumer to stamp out small farms? All of Norfolk being one big NorBigAgCo farm is more efficient than thousands of bolshie individuals.
Jim,
“No, even the likes of TTK isn’t so stupid as to think that would work. Imagine your average council public works team running a farm, with all the usual public sector overmanning, laziness, work to rule, regulatory overkill and woke bollocks piled on top of the concept of ‘This has to be done NOW even if it means working all night because its going to piss down tomorrow and the whole years work will be ruined’ and you’d find farming production through the floor and what was produced would cost ten times what it does today. Just as the USSR found out.”
Did anyone see the thing about Northern trains still using fax machines, because that was what was agreed with the union.
On the bright side, fewer people will sell theirs souls to the devil when they realise they’re going to get clobbered with increased CGT and IHT.
@Jim (as above)
I think you underestimate him.
“The Labour party does not really like small businesses. It is easier for them to deal with a few large businesses than having to deal with a large number of smaller businesses.”
This, absolutely this.
It’s not an accident or a mistake that Reeves has killed off the family farm. They hate all those awkward independent enterprising think-for-yourself old buggers. Hell, some of them probably even vote Tory.
Some useful analysis from Dan Neidle. Note, this doesn’t mean I agree with the policy, I don’t, but it does provide a bit of context. The thread is worth a read.
“ The Country Land and Business Association says the new £1m cap on agricultural inheritance tax relief will “harm 70,000 farms”. That’s 1/3 of all farms.
What does the actual data show? Less than 500 farms/year will be pay more tax as a result of this change every year. Possibly as few as 100.”
https://x.com/danneidle/status/1852064433738256394?s=61&t=VX5cJ0-osgn_JSz7j-uowQ
What’s really surprising is the number of people who thought the party that brought us the Countryside Act would be on the side of farmers and rural communities.
Moreover, it has to be admitted that APR has a downside. You get shedloads of elderly farmers, more or less retired or just keeping chickens or something, sitting on their land until they die because they don’t want to sell it and lose the family the IHT relief. They can’t rent it out or anything either, because that also loses the relief. Generally the children don’t want to take on the business. So the land isn’t managed properly and falls into disuse. The area where I lived in Devon was full of such farms. A lot of them leased the fields out for solar arrays while pretending to graze a few scrawny sheep on them, which does seem to preserve APR.
The last government tried to address this (well known) problem by literally bribing farmers to retire. I don’t know how well it worked, but it was a lot more popular than Reeves’ solution 🙂
– Less than 500 farms/year will be pay more tax as a result of this change every year. Possibly as few as 100.
Why is he talking about yearly? The tax bomb will hit when a farm is passed on.
What’s the big deal with IHT anyway? If I live for 85 years, IHT won’t be a factor in 84 of them.
Less than 500 farms/year will be pay more tax as a result of this change every year.
500 a year, 5000 in a decade, just a few more lives ruined by socialism…
BTW, Singapore does indeed import the bulk of its food but it doesn’t think this is a good thing. It has a 30 by 30 plan to grow 30% of its own food by 2030.
Slipper farmers concerned that unearned profits might actually go back to the taxpayer they were fleeced from in the first place.
If IHT works out at an average of 1/8 th the value of the land after the allowance, then the government is at first glance effectively taking 60 farms a year for itself. No wonder people say taxation is theft.
Same principle with the SDLT charge on non-primary residences – government now says that for every 20 properties of this type, one of them is now theirs (obvs they have to wait).
“Approaching from the other direction as a consumer-side Devil’s Advocate, aren’t large farms more efficient than small farms”
Yes but no. There is a sweet spot of efficiency dictated by the size of the machinery. A combine harvester can harvest X acres of crop in the time available. Once the farm size goes above X you need another combine harvester (and all the other cultivation and planting machinery and labour to operate them). So X is more efficient than half X (because you’re utilising your capital and labour most efficiently) but 2X is no more efficient than X, as now you’ve got 2 of everything. And the variable costs are the same per acre for 100 acres as 10,000. You plant the same amount of seed, use the same amount of fertiliser, the same amount of crop sprays. The Co-op used to own and run 40 thousand of acres of land, and in the end they gave it up because they could never make it make money as a corporate business. The Wellcome trust bought it all I think and promptly broke it up into smaller units farmed by individual contractors. It just didn’t make sense to farm it as one massive entity.
In the UK, because of the cramped nature of the country, the small field size, the network of little woods, hedgerows and lanes, the rules and regulations that control everything as you expand you find your costs per acre start to rise. The cheapest producer per acre is probably the owner occupier, who does all his own work, used old machinery that first saw duty 50 years ago, repairs everything himself. But there’s only so much one man (or one man and his son) can do. So you can’t farm thousands of acres that way. That requires very expensive machinery, paid employees, management, HR and the works. This isn’t actually cheaper per acre than Old Joe and his 200 acres. But its the only way to get large amounts done.
Livestock farming is even worse, as there is no great mechanisation for keeping cattle, a lot of the work is purely manual. And what ability there would be to create so called ‘Mega Farms’ for intensive livestock production are largely outlawed by planning and environmental law. If you tried to recreate the US beef lot system in the UK you’d be shut down pretty sharpish. Not least because our weather would preclude keeping cattle outside in massive lots – a prolonged wet period would mean the whole thing looked like the Somme pretty sharpish. The RSPCA would be all over it like a rash.
After all, if there were massive economies of scale to be had the likes of Tesco et al would have hoovered up farmland decades ago and created farms the size of counties. It hasn’t happened, for good reason, its just not economic to do.
“My own father … had to get a loan to unlock his mother’s estate the daft twat.”
Decades ago, when death duties were much higher, a middle-aged, middle-ranking, middle-mortgaged academic I knew, with a wife at home looking after their children, was astonished to inherit a large sum. He couldn’t possibly have afforded to pay the death duties bill so visited his bank to ask for a loan.
“How much would you like to borrow, sir?”
“Something shy of a million pounds.”
According to many of the well informed comments on the Guardian, Elon Musk also only achieved his success due to enormous inheritance from his father who was a wealthy diamond mine owner and this is what allowed Musk to invest in successful companies and make his billions off the toils of others. I had no idea – I thought he had more of a hand to play in their success.
Collective farms were the reason why the Soviet Union was the largest (sometimes second-largest after Communist China) importer of wheat in contrast to the pre-communist Tsarist Russian empire and post-communist Russia and Ukraine which were/are among the world’s largest wheat exporters – they were also the reason for the horrendous Ethiopian famine under Haire Mariam Mengistu’s Stalinist regime.
When I was working in Eastern Europe post-Berlin Wall, it was clear that even in the satellite states they had been an economic disaster.
I don’t think Starmer and Reeves are planning to introduce them, they are just trying to grab as much monrey as possible off everyone who has some and is not a member of their paymaster, mostly public sector, unions. The IHT grab on pensions means that my DC fund which I had over-prudently built up for my, and my wife’s, old age so had intended to pass most of it down to my son for his old age will face a tax rate of 64% on every £ he draws out in contrast to the mostly 25% (and a bit at 40%) tax relief I got on contributions: that, too, is unfair.
Dyson Farming seem to be doing quite well.
Musk had $3,000 when he started out in business.
His father had owned an emerald mine. Of the sort of scale of 10 blokes with some shovels.
Musk didn’t come from a broke family, entirely true. But he didn’t get rich by investing familial money – not at all.
“His father had owned an emerald mine.” Hm. When we lived in Oz a bloke tried to sell me an emerald mine. If I’d fallen for it I might have become the owner of an emerald mine in the sense of owning the shares of a hole in the ground not too far from genuine but exhausted emerald mines.
“ There is a Freakonomics thing that says that roughly speaking, letting the kids take over is a bad idea.”
IIRC the optimum solution was to install professional managers but keep the business in the family.
Dorset Council owns quite a lot of farms that it leases and it seems to work quite well from what I’ve heard.
https://www.dorsetcouncil.gov.uk/planning-buildings-land/county-farms/the-county-farms-estate
That said ,theDimLibs took control of the council at the last election so I suppose they’ll screw it up with stupid climate change and other whacky green policies.
Spiro Ozer said:
“APR has a downside. You get shedloads of elderly farmers, more or less retired or just keeping chickens or something, sitting on their land until they die because they don’t want to sell it and lose the family the IHT relief. They can’t rent it out or anything either, because that also loses the relief.”
You’re a generation out of date; if it’s rented out under a post-1995 lease, you can get full inheritance tax relief on rented farmland.
http://www.gov.uk/guidance/agricultural-relief-on-inheritance-tax#rates-of-agricultural-relief
There’s a longer qualification period for let land (you must have owned it for 7 years, compared to only 2 years if you’re actually farming it), but you can count the pre-tenancy period if you previously farmed it yourself, so in the example you’re talking about it’s not a problem.
@ Andrew C
What’s the big deal with IHT anyway?
It’s a big deal because 40% of a lifetime of making good financial decisions, managing risk and not throwing money away can be a tidy sum stolen from the gift to your children.
The budget changes, with good life expectancy, increased my projected IHT bill by £1.6 million. That’s a big deal. Needless to say my financial strategy immediately changed to ensure that won’t happen, but it’s still going to hurt.
Bloke in North Dorset said:
“Some useful analysis from Dan Neidle.
“The Country Land and Business Association says the new £1m cap on agricultural inheritance tax relief will “harm 70,000 farms”.
“What does the actual data show? Less than 500 farms/year will be pay more tax as a result of this change every year.
https://x.com/danneidle/status/1852064433738256394?s=61&t=VX5cJ0-osgn_JSz7j-uowQ
Neidle’s stats don’t include most of the farms that are passed on to the younger generation while the retiring farmer is still alive (because, provided grandad lives another 7 years, there’s no inheritance tax, so never any need to claim agricultural relief).
But they are still affected by the change. Currently the younger generation doesn’t have to worry about inheritance tax if the old man doesn’t last 7 years, because they can claim agricultural relief. But once that’s restricted, they’ve got 7 years of worry that they’re working on a farm that could be taken off them by the taxman. Or they pay a big premium for a 7 year life insurance policy.
My limited experience makes me think that includes most medium sized farms; the little runty ones get held until death, but for anything that’s big enough to support more than 1 household, there’s at least a partial handover to the younger generation once grandad gets too old.
So potentially a lot of farms that are very much affected by the Budget change, but don’t show up in Neidle’s stats. But it would be interesting to hear from others whether my guess there is likely.
What andyf said.
You spend a lot of time planning to good effect, for some worthless cunt to stand up in front of the rest of the clowns and take a fucking dump over years of effort. Useless creature.
The problem with the ‘its only X% of farming estates that will pay it’ is that the denominator number of ”farmers’ is taken from the data for farm subsidy claims, where small farms and hobby farms that are not really commercially viable can still make a claim (or could, direct subsidies for food production are being phased out in favour of eco-subsidies for trees and birds and butterflies). There’s a lot of small holdings where someone buys a farmhouse in the country with up to 100 acres of land, isn’t a farmer so rents the land to a neighbouring actual farmer on a short term grazing licence or contract farming agreement but can still claim they are a ‘farmer’ on paper and claim subsidies. This means the number of farmers is artificially high, and the average farm size artificially low. If one looks at those people actively farming, ie where the business owners are involved in the day to day management and operation of a farm, the number of such holdings will be far lower, and the average size far higher. These are the people who are caught up in this. The good lifers who have come out of the City, bought a country pile with a few 10s of acres which they are nominally ‘farming’ are fine, the agricultural value of their land will mostly be under £1m, the value of the house covered by the £1m IHT allowance to children. The ones who will get hammered are the farming families who have expanded over the generations by buying more land when they can, and renting land off the incomers and elderly farmers who should have retired but can’t bring themselves to. They probably own 400-600 acres, and maybe farm as much again on licences and farm business tenancies. These are the backbone of the farming industry and will get taken to the cleaners by the new rules.
Don’t know the legals over there – I’m USA – but here, if the family is stable enough for long-range planning, and you-the-owner have 15 or so years before you croak when you first think of this, you start giving away (in arcane legal ways) ownership shares to the kids ASAP, slowly, and you can avoid some tax at the end.
Tends to keep the kids on the (viable) farm, too, which is another benefit of planning.
Let’s say Young Tom inherits a farm, and faces an IHT bill.
I’ve retired after 36 years pounding a computer, and I have cash, which I’d like to swap for income to see me over the next 2 decades or so.
So I buy a field from Young Tom, and rent it back to him. He pays his IHT bill, and carries on farming it as before.
The farm is broken up on paper, but in reality keeps going.
Does that work?
No doubt CJ, it depends on whether he can afford the rent.
“Does that work?”
Not really, because when you keel over your heirs will think ‘Oooh, dad owned these fields, look how much their are worth! Lets chuck the farmer off and sell them so we can buy a house in France’. Its just putting off the day when the farm gets split up. Once you’ve sold the land its gone, even if you have a tenancy on it. Those can always be ended, FBTs rarely run for more than 5 years. No one is going to grant one of the old Agricultural Holding Act Tenancies which given security of tenure for 3 generations, you would effectively have lost half of the capital you spent buying the land freehold in the first place.
“CJ Nerd
November 2, 2024 at 9:24 am
Let’s say Young Tom inherits a farm, and faces an IHT bill.
The farm is broken up on paper, but in reality keeps going.
Does that work?”
Until Young Tom decides that the rent payment is too large and its no longer worth working the farm so the landlord can get all the money and thus sells off his equipment and fucks off for a job in the city.
Or until you decide that you’d rather have the money in cash so you can go live somewhere exciting for your last few years.
@Andrew C – “What’s the big deal with IHT anyway?”
For some reason, IHT is very unpopular, even though relatively few people pay it. It seems as if people have an instictive knowldge that it is economically a bad idea.
The reason that it is a bad idea is that it is taxing an involuntary transaction. Voluntary transactions create value. If Bob buys a silver teapot from Carol for £100, this means that he values the tepot at more than £100 while Carol values it less. The exchange therefore makes both richer. This increase in overall wealth can be taxed to send part of it to the government, but the tax cannot be as large as the wealth created by the transaction because then the transaction would leave neither Bob nor Carol with any reason to perform it and it would never happen.
Involuntary transactions are liable to destroy wealth. If Bob steals the teapot from Carol, he gains but probably by less than the amount lost by Carol, since if there was an overall gain he could have simply bought it.
Inheritance is clearly a completely involuntary transaction, so it has the potential to destroy value. The deceased has lost the entirety of the value of their posessions and there is no reason to suppose that this loss is less than the sum of tha gains of those inheriting. Consequently, a tax is a tax on loss rather than a tax on gain. But, unlike for voluntary transactions, there is no mechanism which prevents the tax from adding arbitrarily to the loss.
In this respect, it’s just like theft. If Bob steals the teapot, it is morally wrong to tax him on his gain, as that is also a tax on Carol’s loss. Of course, in contrast to inheritance, if it is known that Bob has stolen the teapot, he can be made to return it.
@ Charles
For *several* reasons IHT is very unpopular. One is that is economically harmful as a disincentive to saving and investment, another is that is unfair as the multiplicity of loopholes discriminate in favour of certain people (usually groups that historically had political influence), another is the apalling bureaucracy that means one has to spend stupid amounts of money to lawyers or many hours of time in order to obtain Probate even when no IHT is due (I had to fill in 140 pages of HMRC forms to prove that my wife and sister-in-law did NOT need to pay IHT after my mother-in-law died). The aggregate of burdens on those with an inheritance that is not sufficient to pay IHT is greater than the aggregate of burdens on those who *do* need to pay IHT – even ignoring the value-destruction due to the delay between death and obtaining Probate while houses, gardens, cars, businesses etc sit there decaying.