Inheritance Tax: Family-owned Businesses

Debate between Edward Leigh and Susan Murray

Tuesday 3rd June 2025 Westminster Hall

[Susan Murray]

I completely agree: it appears that there are many factors the Government have not taken into account.

The situation was brought home to me by a local company in my constituency: Archibald Young Ltd Founders and Engineers, a family-run foundry that has been operating in Kirkintilloch since 1959—not quite as long as the business mentioned by the hon. Member for Blackley and Middleton South (Graham Stringer). I thank Ian Young for sharing his company’s position and highlighting the vital role that it plays in defence by producing high-precision critical components. Since it was established, the company has grown steadily over three generations. At one time, Scotland had over 260 foundries; it now has 12, of which 11 are family-owned, and all are third generation.

[Sir Edward Leigh (Gainsborough) (Con)]

The hon. Lady is making an excellent speech. Will she make the point that we do not really understand where the Government are coming from? I understand why they want to claw back money from big estates, or from people who buy farms just to avoid inheritance tax—not Jeremy Clarkson of course; he is a fantastic chap—but I cannot understand why they are focusing on family farms. Will the hon. Lady make the point that the National Farmers Union has offered various compromises, and the Minister should meet the NFU in a positive way to ensure that we keep our family farms run by families?

[Susan Murray]

I agree; it is important we understand that these businesses and family farms exist in their own right and are not simply personal property, even though they are family owned.

Today, under Andrew Young, Young’s foundry continues to provide skilled and specialist manufacturing from its bases in Kirkintilloch, Motherwell and the north of England. Like so many of the family-run firms we are here to talk about, its success has been built over decades of hard work and reinvestment in its business and workforce, yet recent Government policies are putting that at risk.

Clearly, family-owned businesses can cope with challenges in the economic and business environment, which they have navigated over generations, but when Government policies are hostile to their success and survival, their ability to create jobs and grow the economy is eroded and their future is uncertain. Whether it is rising energy and employment costs, burdensome business rates or disproportionate regulatory hurdles, these enterprises face challenges that their multinational competitors are often better equipped to absorb, or that they do not face at all.

The reforms to business property relief and agricultural relief announced in the 2024 autumn Budget have dealt family businesses a blow that risks undermining the very principle of intergenerational succession that has been at the heart of their success. They must retain profits to reinvest in business assets, to enhance business competitiveness and invest in product development.

Prior to the reforms, the shares held in private family-owned businesses could be passed on upon death to the next family generation, free of inheritance tax. This was enabled by the shares qualifying for 100% business property relief. The 2024 Budget introduced a new £1 million relief cap beyond which inheritance tax is due, with business property relief of 50%, resulting in an inheritance tax charge of 20% being applied to such transfers upon death. This sudden change means that family financial planning opportunities are much more limited. Under the new rules any lifetime transfer of business property relief or agricultural property relief assets made on or after 30 October 2024 will be subject to the new relief limits if the donor dies on or after 6 April 2026.

GAP Holdings Ltd is another family-owned business based in my constituency. I thank Mark Anderson of GAP for allowing me to share his company’s position in this debate. He has also met the Secretary of State for Business and Trade and colleagues. Founded in 1969, GAP’s tool-hire business has grown dramatically. By reinvesting in its assets over the past 10 years, it has tripled its turnover and now employs over 2,000 people across the UK. GAP’s annual profit to March was £44 million, and its earnings before interest, taxes, depreciation and amortisation were £132 million. For GAP, the potential inheritance tax charge arising upon the death of the second generation would amount to tens of millions of pounds. The proposed £1 million relief cap would make no meaningful difference to the size of the problem. Three months ago, GAP exceeded the £1 million mark in its total donations to charitable causes. That is the kind of benefit that these businesses bring to the community.

The inheritance tax changes would require the independent valuation of companies. Will the Minister clarify whether there is a consistent and defined methodology for that activity? When a family business owner dies and leaves shares to the next generation, there is no cash available to pay inheritance tax liability and no windfall to successors. In practical terms, it is business as usual, and the business continues to use its assets to trade and contribute economically to the local community. It is not the same as selling a business; however, it may force the company to be sold completely to pay the liability.

Will the Minister confirm that it is not the Government’s intention that a family-owned business that has been passed down through the generations is forced to be sold as a result of the change, or forced into failure by having to take on unsustainable levels of debt?