The Chancellor’s inheritance tax raid on family farms and businesses is ‘unlawful’, the High Court heard today.
As farmers and business owners descended on the Royal Courts of Justice at the start of a two-day judicial review against the government, lawyers claimed Rachel Reeves broke a long-established government promise ‘by deciding not to consult in the manner required’ over her plans to hit family enterprises with death duties.
The hearing heard she had ‘acted unlawfully in conducting a very limited consultation’ on the proposals.
As tractors parked up outside the court building in central London, protestors hung a large banner reading: ‘Keep farms & firms in the family.’
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’, adding: ‘This came out of the blue. I think they don’t understand the impacts.’
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.
Businessman Steve Perez (left) with farmers Tom Martin (centre) and his farther George Martin (right) outside the Royal Courts of Justice
Tractors line up outside the Royal Courts of Justice ahead of a Judicial Review into the Chancellor’s inhieritance tax raid on family farms and firms
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.
But this still leaves farmers and businesses facing inheritance tax bills.
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.
They 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’.
Protestors gather outside the Royal Courts of Justice
Tom Martin said: ‘This legal case matters to everyone affected by the proposed tax changes, and I am proud to speak for the concerns of farmers and business owners whose livelihoods would be impacted.
‘By deciding not to have a proper consultation, the Government knowingly chose to deny us the chance to influence the new policy and its implementation. I hope justice will prevail and the court will hold the Government to its word.”
James Austen, the partner at Collyer Bristow working on the claim, said: ‘The court is hearing the claim at a difficult and uncertain time for UK farms and businesses, whom the Chancellor chose to shut out from the design and implementation of this controversial tax change, which has caused such deep concern to so many people.
‘The Government’s Tax Consultation Framework, which has been in place for 15 years, was put in place because proper consultation is vital in getting tax changes right first time.
‘Long experience shows tax consultations to be necessary for damaging unintended consequences – and embarrassing U-turns – to be avoided.
‘It is disappointing the Government refused to change course in this case, leaving the claimants with no alternative but to ask the court to hold the Government to its promises.’
Alexander Marcham, managing director at Alvarez & Marsal, said: ‘Many of the farms and businesses affected by the Chancellor’s decision have been built over generations and are expected to endure beyond the current owner.
‘When tax changes as significant as this are implemented without giving those affected the opportunity to be heard, planning for the future becomes much harder.
‘Families are left making decisions about succession, investment and the future of their businesses without clarity – or a fair chance to participate in policy development.
‘The court’s decision will be an important moment in bringing greater clarity to the process behind measures and it will have far-reaching consequences.’
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