The Stable Policy Environment Family businesses across the country have been positioned to deliver positive economic outcomes across generations because of the settled policy environment in which they have operated. For many years, there has been a strong appreciation of the need to ensure family businesses are not unduly penalised when passing ownership from one generation to the next. BPR and GHR are central to this stable policy environment and – as the table below demonstrates – have provided family businesses with confidence and certainty to effectively succession plan for decades.
Tax Policy
Overview
1894 and the introduction of Estate Duty
Five separate death duties were combined into one, taxing capital values of land and property for the first time.
1930 Finance Act and changes to valuation
The Government of the time believed that some business shares were being undervalued when calculating Estate Duty, reducing tax revenues that should be due. Some amendments to valuation methods were made. The valuation of unlisted shares was changed entirely and is widely thought to have resulted in a valuation divorced from that which could be met on the open market. A business rate was introduced to apply to Estate Duty with the intention of supporting family-owned manufacturing businesses (this is the starting point for what BPR is today).
1940 Finance Act and further changes to valuation
1954 Finance Act and the recognition of family businesses
1974 and the replacement of Estate Duty with Capital Transfer Tax (CTT)
Excluded provisions for business relief.
1976 and the introduction of business relief to the CTT
Broader than the business relief that was part of Estate Duty, applying to more than just industrial buildings and plant and machinery, and at a rate of 30 per cent. GHR was established for businesses and non-business assets, following relief for gifts of agricultural land that was established in 1974.
1978 Finance Act and CGT relief on gifts.
1986 and CTT is replaced with IHT
Abolishing entirely the tax on lifetime gifts to individuals.
1992 and the Taxation of Chargeable Gains Act
Consolidated various CGT laws – including GHR – into what exists today.
2008 and the introduction of Entrepreneurs Relief
Now known as Business Asset Disposal Relief (BADR), this offered a route to reducing CGT liabilities that eclipsed GHR.
Table One: Tax reliefs policy timeline
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