Mr Sunak is understood to be looking for more money to fund Prime Minister Boris Johnson’s desire for a drastic increase in post-Brexit infrastructure spending. As a result the Chancellor is reportedly thinking about scrapping two tax reliefs used as loopholes by rich families. Agricultural Relief and Business Property Relief allow rich Britons to pay less inheritance tax if they set up a business or buy land which can be inherited after death.
The reliefs can protect between 50 to 100 percent of money invested from inheritance tax.
Ghost companies and empty land can therefore serve as a funnel for money and a safe box from tax.
If the Treasury were to end Business Relief, they could rake in an approximate £480million a year.
Similarly, the scrapping of Agricultural Relief is set to bring in £320million.
Adam Corlett from the Resolution Foundation told The Sun: “The gaping loopholes in our inheritance tax system help the super-wealth avoid paying their fair due, and undermine wider public trust in the tax system.
“Scrapping or scaling back these loopholes could raise up to £800million – money that could be far better spent on helping to ‘level up’ living standards across the country.”
The news comes as a report by the National Infrastructure Commission said the Government’s proposed infrastructure projects will simply just catch up with the gap in building, and will not be a comprehensive strategy to address challenges.
It warned: “Money alone can’t make up for months of lost time on some programmes, and the government now needs to set these funding pledges within a cohesive long-term plan.”
According to the report, the government will have to choose between tax rises or dropping fiscal rules laid out in the Tory manifesto.
This is because borrowing is not forecasted to drop before 2022/23.
The potential cash boost, then, appears to be music to the ears of Prime Minister, Boris Johnson, who wishes to break ground on a series of extravagant infrastructure projects following Brexit.
In a speech delivered in the north-east of England in December, the Prime Minister vowed he would “repay the trust” of former Labour voters by “getting Brexit done” and working on infrastructure.
He said: “I will repay your trust. Everything I do as your prime minister will be devoted to repaying that trust.
“What we want to do as Conservatives is we want to take our country forwards, but we want to do it by uniting and levelling up across the whole of the UK.”
The amount shelled out by Britons in inheritance tax sky-rocketed to an eye-watering £5.4 billion in 2016/7, with more people now paying the tax than ever before.
But issues have always lain in loopholes which many believe are unfairly exploited by the rich.
Recently, the All Party Parliamentary Group on inheritance and intergenerational fairness set their sights on killing off the major reliefs that some take advantage of.
The UK’s super-rich were found to pay just half of the rate of inheritance tax paid by the merely ‘very rich’ according to HMRC data in 2019.
John Stevenson, Conservative chair of the APPG, said: “The huge complexity around how the tax is levied, and the reliefs available on it, leads to lots of confusion and a strong sense of injustice.
“The rich get away with not paying, and IHT is perceived as an unfair penalty on hard working savers.
“Our bold proposals for reform seek to address this unfairness by simplifying the system and ensuring that the higher value estates that currently take advantage of so many reliefs and exemptions actually pay some IHT.”
Inheritance tax is an excise on the estate of someone who has died.
There is usually no inheritance tax to pay if the value of the estate is below £325,000.
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