'Huge U-turn on cruel, immoral farm tax plans'

RELIEF AS INHERITANCE TAX PLANS WATERED DOWN

- By SOPHIE WINGATE and NINA LLOYD

THE UK Government will raise the inheritance tax relief threshold for farmers from £1m to £2.5m in a climbdown following months of protest.

The change to the reforms initially unveiled at Labour's first Budget last year comes after ministers "listened to concerns" of the farming community and businesses, the Department for Environment, Food and Rural Affairs (Defra) said yesterday.

Farmers Union of Wales (FUW) president Ian Rickman called the news a "welcome early Christmas present for many farmers across Wales who have endured months of uncertainty and anxiety.

The original Treasury plans to raise money as farmers pass their businesses from generation to generation triggered protests with tractors outside Parliament and criticism from some Labour MPs in rural seats.

And Baroness Minette Batters, the former head of the National Farmers' Union (NFU) who led an independent review for the UK Government, warned that the proposals had led to farmers contemplating suicide to avoid the tax changes.

The higher threshold, which will take effect in April, will allow spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax - on top of existing allowances, Defra said.

Above that allowance, farmers will get 50% relief on qualifying assets and will pay a reduced effective rate of up to 20%, rather than the standard 40%.

The number of estates facing higher inheritance tax will be reduced from around 2,000 under the original plans to upto 1,100, hitting only the largest farms, according to the UK Government.

Farmers currently do not pay inheritance tax on agricultural and business assets which they pass on.