Family fortunes

In this world nothing can be said to be certain, except death and taxes

No matter how haggard and cynical I get, I am still one of those people who gets a tiny bit excited when I spot people I’ve seen on the telly in the flesh so to speak – IRL, as social media terms it.

Julian Clary in the queue for the cashpoint at Regents Street, Jilly Cooper picking someone up from Heathrow, Mark Gatiss in the audience at a play, Davina McCall out running, Bob Mortimer in Sainsburys, Mel Stride MP standing on the pavement in Sevenoaks.

On closer examination, it turned out that Stride, Shadow Chancellor of the Exchequer and MP for Central Devon, was filming a piece for Channel 4’s politics programme.

He gets around does Stride. Only a couple of weeks before I spotted him on Sevenoaks High Street, he was in Wolverhampton. At Carvers, as it happens, talking to a group of merchant members of the Fortis buying group (and other family business owners), to find out what implications Labour’s tax changes have for family businesses. Spoiler alert: they ain’t good.

Business Property Relief was designed to ensure that family-owned businesses could make long-term investments, making those businesses financially secure for the longer term, allowing them to stay in family hands, rather than having to be sold off to corporate entities on the death of the main shareholder. It’s a business ethos that is about the bigger picture, about businesses that grow and develop over time, providing employment and career prospects for local people.

Yet Labour’s changes to BPR (and the Agricultural Property Relief which was the trigger for all this) have serious unintended consequences to the builders merchant’s sector. If you are running an independent family-owned builders’ merchants, you will have made huge investments in land, buildings, machinery, vehicles, stock and working capital.

The changes under Labour will increase the likelihood of family-owned businesses facing inheritance tax on the value of business assets upon the death of the owner, meaning they could have to sell assets, downsize or liquidate entirely to meet those tax bills. As an aside, think about the number of stately homes that were sold off and knocked down to pay ‘death duties’ in the last 100 years.

We talk a lot about the need for succession planning, something that is likely to get way more complicated, if not nigh on unaffordable, if there’s going to be a huge tax bill to pay.  All the benefits that family-owned businesses bring to the local economy – jobs, community involvement etc – could be impacted if businesses have to sell-up or slow down because of the perceived significant tax liabilities in the future.

Joe Tipper, director at Walter Tipper, who features in Stride’s video on his LinkedIn feed sums it up thus: “We feel attacked, actually, by the present government, which seems to be demonstrating a complete lack of understanding of the value that family business contributes to society”

Plus, the government has been exceedingly vocal in its aim to build 1.5m homes within the life of the Parliament. Family-owned builders’ and plumbers’ merchants are an essential part of the building materials supply chain, those homes will be a lot easier to get built if there is a healthy functioning and, yes, diverse, supply chain. Diversity of ownership is as important as diversity of any other type.