Treasury DEFENDS inheritance tax raid on household farms and companies after tractors descend on High Court

The Treasury has defended its devastating inheritance tax raid on farmers and family businesses in a High Court showdown.

Lawyers for the government argued the pledge to consult those affected by tax changes only applies ‘where possible’.

The comments came as tractors parked up outside the Royal Courts of Justice to support a judicial review into the Chancellor’s plan to hit family farms and businesses with death duties from next month.

The court heard that the tax raid was ‘unlawful’ because Rachel Reeves broke a long-established government promise ‘by deciding not to consult in the manner required’ over her plans.

Aparna Nathan KC, acting for farmers and businesses making the claim, said: ‘Our challenge is to the fact that a voice was deprived when a voice was promised.’

But Mark Fell KC, for the Treasury and HM Revenue & Customs, said the commitment to hold at least one formal public consultation was not absolute and only applies ‘where possible’.

He added that the Treasury must keep the ‘necessary flexibility’ to respond ‘promptly and appropriately to changes in the UK’s public finances’.

Tractors park up outside the Royal Courts of Justice at the start of the judicial review

Protestors make their voices heard over the inheritance tax raid

The case relates to changes to so-called agricultural property relief (APR) and business property relief (BPR) announced in her first Budget in October 2024.

The plans left family farms and firms facing inheritance tax of 20 per cent on assets worth over £1million from April this year.

The changes provoked a fierce backlash with farmers driving tractors through central London in protest.

In an embarrassing U-turn just before Christmas last year, the Chancellor backtracked, raising the threshold from £1million to £2.5million, or £5million for married couples.

Cambridgeshire farmer George Martin, 74, and his son Tom Martin, 45, have joined forces with the Farmers and Businesses for Fair Tax Relief campaign group to bring legal action over the changes.

Businessman Steve Perez, the chief executive of the Global Brands group behind drinks such as VK and Hooch, said the tax raid has ‘been badly thought out’.

Part of the Farmers and Businesses for Fair Tax Relief group, he added: ‘These reliefs have existed for almost 50 years. They were introduced by a Labour government to encourage families to invest for the long term and build businesses that support jobs, communities and economic growth across generations.

‘Yet the Government has chosen to make major changes without proper consultation and without a full economic impact assessment. That matters because family businesses are not a small niche. They are the backbone of the UK economy.

‘Most family businesses are asset-rich but cash-poor. When a founder dies, there is rarely spare cash available to meet a large inheritance tax bill.

‘The reality is simple: many businesses will be forced to sell — often to private equity, overseas buyers or PLCs — and some will simply be broken up.

‘Ironically, while the Government says it wants to protect working people through new employment legislation, these changes could reduce job security across thousands of businesses.’

Businessman Steve Perez (left) with farmers Tom (centre) and George Martin (right)

The campaigners argue that Treasury documents dating back more than a decade – including the ‘Tax Consultation Framework’ (TCF) dated March 2011 – suggested the government would consult on ‘significant tax changes’.

The claimants argue no such consultation took place.

By failing in this regard, the court heard the Chancellor ‘deprived the claimants of an opportunity to present their case and voice their concerns’ and ‘therefore acted unlawfully’.

Tom Martin said the case was ‘really about fairness’, adding: ‘As family farms, family businesses, we’ve really struggled with the latest changes but we believe that the Government didn’t consult, they’ve promised to consult with any major changes, and we don’t believe they’ve done that.

‘We’re asking the court today to agree with us, to state that these are clearly big changes – there are already examples of farmers refusing cancer treatment and there’s one sad suicide as well, so these are not minor changes.’

Perez said: ‘I hope the learned judges hearing this case will conclude that the Government has not acted in accordance with the law or the long-established principle that major tax changes with such profound economic consequences should follow proper consultation.

‘This is not just about tax policy. It is about the future of family businesses, the millions of people they employ, and the long-term health of the British economy.’