Finance Bill Sub-Committee

This session scrutinised Budget reforms to inheritance tax (IHT) affecting agricultural and business assets, focusing on APR and BPR changes, the shift from PSAs to personal representatives (PRs), and the administration burden on lay PRs. Witnesses described the policy objective: to keep pension saving for retirement and not allow pension pots to be used to avoid IHT, with IHT remaining the main vehicle for taxation. The Budget introduced a higher £1 million spousal transfer and aimed to align DB and DC schemes, while maintaining reliefs up to £1 million for beneficiaries. The committee explored the consultation approach, the role of DOTAS, and the regulation timetable, with regulations expected in spring next year and the reforms taking effect from 6 April 2027. There was emphasis on guidance and tools for lay PRs, the potential liquidity constraints (including instalment options and payment on account), and the need for impact assessments on agriculture and business assets to avoid unintended consequences. Public awareness and transparency of statistics were raised by witnesses, who urged ongoing assessment and possible adjustments as evidence comes in. The session also touched on the government’s evolving approach to tax policy principles, and the role of a new regulatory framework for promoters of tax avoidance schemes under the Finance Bill 2025 (part 6, chapter 1).

The Economic Affairs Committee examined the Government’s inheritance tax reforms with two witnesses. CenTax’s Andy Summers explained that the Government’s published statistics provide a reasonable baseline for who would pay more tax, but emphasised that the discussion should consider broader impacts on estate types and potential farm-breakup. He also flagged data and measurement issues, including book-value valuations for tenant farmers, Defra data limitations, and pension wealth data quality. The witness also argued for greater academic engagement in policy-making and discussed targeting reforms (minimum share rule) to prevent tax sheltering. A barrister, Malcolm Gammie KC, critiqued the new Tax Policy Making Principles as insufficiently clear, warned against agile, “make-it-up-as-you-go” policy-making, and stressed the importance of early input and robust data before reform. The session highlighted tensions over data sources, timing, and the design of farm-property reliefs, with calls for more transparent modelling and pre-legislative consultation. Targeted changes like a minimum-share rule and transferable allowances were discussed as potential improvements to raise revenue while protecting genuine family farms.

The Economic Affairs Committee scrutinised the Government’s proposals to impose inheritance tax on pension pots and to require reporting of IHT on unused pensions. Witnesses argued that personal representatives should be the reporting nexus rather than pension schemes, citing practicality and consistency with the current IHT regime, but warned of significant implementation risks, including the 6-month IHT deadline, potential liquidity problems, and the scale of untracked pension pots. They urged more time, stronger HMRC guidance, a central help point for lay PRs, and consideration of a standalone pensions-inheritance-tax approach. The second panel, including Sir Steve Webb and Baroness Altmann, debated practicality, dashboard accessibility, and potential reform options, with voices on both sides about the best path forward.

The Finance Bill Sub-Committee scrutinised proposed changes to business property relief (BPR) and agricultural property relief (APR). Witnesses from manufacturing and family-business bodies warned of low awareness among SME owners, uncertain implementation, and liquidity challenges, including a six-month first-payment deadline after death and complex valuation processes. Agricultural stakeholders highlighted unrealistic probate timelines, liquidity gaps, and valuation bottlenecks for farm assets, urging practical transitional measures, greater consultation, and potential alternatives (such as a 7–10 year clawback or other funding mechanisms) to mitigate disruption to farm livelihoods and UK supply chains.

The Finance Bill Sub-Committee session (20 2025-10-20) scrutinised inheritance tax implications of pension-relief reforms (APR and BPR) alongside agriculture and business relief. Witnesses warned the six-month deadline for administering estates is unworkable given complex valuations, information-sharing with pension schemes, and potential delays that could affect tax collection and professional indemnity insurance. They pressed for practical mitigations (longer deadlines, clearer information-sharing, transitional relief, and guidance) and criticised the government's consultation as narrowly scoped, urging a more transparent, resourced process for practitioners and taxpayers.

The Finance Bill scrutiny focused on the government’s proposal to criminalise non-disclosure under the DOTAS regime and on targeting a small group of aggressive promoters. Witnesses from professional bodies and industry (CIOT, ACCA, ICAEW, Law Society, TaxPolicy Associates, TaxWatch, CBI, EY) argued the hallmarks are uncertain and wide, risk chilling legitimate tax planning, and may unduly disrupt advisers and inward investment. Several witnesses urged delay or more targeted approaches (e.g., universal stop notices) and warned of cross-border enforcement challenges and implementation risks within the broader Finance Bill package.