The boss of one of York’s largest employers has slammed new inheritance tax measures announced in the recent budget, which he says threaten the future of family-owned businesses.

Stuart Paver, chairman of Pavers, makes his plea in an article submitted to the Press.

His call adds to opposition from business groups and opposition Conservatives to the move, which they say will threaten investment at such firms and force the sale or closure of many such businesses.

In her budget, Chancellor Rachel Reeves announced plans to extend inheritance tax to include family farms and businesses. An effective rate of 20 per cent would operate above assets exceeding £1 million - a move expected to generate £500 million a year by 2027.

RECOMMENDED READING:

Mr Paver says her budget has “put a cloud of uncertainty over the future of family business ownership in our region.”

The owners of such businesses are now wondering whether they will be able to pass on their business to their children when they die.

However, York's Labour MPs have defended the inheritance tax move, with York Outer's Luke Charters claiming that it was necessary "to ask those who can afford it to pay their fair share" in order to stop "York's working families from paying more tax".

But speaking to The Press, Mr Paver said that if he died in two years time, the Pavers family would have to find £10 million to pay the inheritance tax on his shares in the business.

Sarah CzarneckiSarah Czarnecki (Image: Pic supplied)

He explained: “Without taking money out of the company or dramatically reducing investment, I don’t know where they would find that.”

Businesses should contribute their ‘fair share’ he continued, adding family firms pay £200 billion in tax every year - a quarter of the total tax take. But inheritance tax would become a direct cost to the business.

He continued: “This tax obligation could force family businesses to halt reinvestment altogether, instead diverting money into costly insurance schemes to protect future shareholders.

“Others would feel compelled to sell the business entirely, something that often results in ownership transferring to those with less interest in long-term growth or community support, undermining the core values that family businesses bring to the economy.”

He added family businesses need the confidence to invest for the future and called on the Chancellor to consult with family business owners to reverse this change.

The York and North Yorkshire Chamber of Commerce says the inheritance tax changes are “a huge worry for thousands of businesses".

It’s president Sarah Czarnecki continued: “Families who have put their entire life’s work into growing a business now face the prospect of facing a bill sometimes running into millions of pounds when they try to pass their business on.

“If we want to encourage more entrepreneurialism in this country, penalising successful businesspeople is hardly the way to go about it.”

Thirsk and Malton MP Kevin Hollinrake says family businesses are contacting him about the issue, both as an MP and as former shadow business secretary.

Mr Hollinrake has previously warned the tax changes could lead to the closure or sale of businesses. Labour did not understand the ‘devastating’ impact of the move, which would lead to family firms investing less, knowing their business would be ‘taxed away.’

Luke Charters and Rachael MaskellLuke Charters and Rachael Maskell (Image: Pic supplied)

He added: “Countries like Germany don’t do this. They understand how important inter-generational businesses are."

However, York’s Labour MPs have defended the budget and its changes.

Luke Charters, who represents York Outer, where Pavers has its Poppleton headquarters, says the budget delivered ‘a boost’ for small business.

He said: “Those with just a few employees are paying less in National Insurance than before. The business owners I meet want real change: a strong NHS, more teachers in schools, and police on our streets to tackle crime.”

The MP added: “This budget made the hard but necessary choices to put our public services back on track. I stood up at the planning committee last year to support Pavers' expansion, and I’ll continue to support local businesses. But to stop York's working families from paying more tax, we need to ask those who can afford it, to pay their fair share."

York Central’s Rachael Maskell agreed that business needs to be consulted but budget measures such as a  higher minimum wage would lift people out of poverty and lead to them spending more, thus helping the local economy.

Ms Maskell said: “The economic challenges are apparent, and some changes I have supported, some I believe would have been better phased, while others I have disagreed with.

“This is why I believe Governments are strongest when they are working with those who have expertise to share, whether business leaders, academics or public servants. How do we smooth the curve of growing inequality, how do we ensure that everyone has enough and how do we secure our NHS, justice system and education?”

She added: “It is right that the business world critiques policy and holds Government to account, but in doing this, it must also balance the challenges which sit on the Chancellor’s desk, for the short and longer term.”