Thousands of farmers are expected to descend on London next Tuesday (19th November) to demonstrate opposition to changes to inheritance tax.
While much lower profile, the plant hire industry appears close to taking similar steps, or perhaps joining forces with the farmers.
The Scottish Plant Owners Association (SPOA) said that Rachel Reeves’ budget two weeks ago “signals the death of the plant hire industry”.
Construction Plant Hire chief executive Steve Mulholland called it “one of the most anti-entrepreneurial presented in the last 40 years”.
In an unpublished letter to the Financial Times last week, Mulholland wrote: “Our members remain excluded from being able to take advantage of the full expensing allowance, the rise in NI [national insurance] is a tax on jobs and will deter companies taking on more people, will slow increases in wages at a time when we need to increase the construction skills base. The proposed changes to business property relief as part of wider inheritance tax changes will have a massive and detrimental impact on SMEs and family run businesses – the backbone of construction plant-hire and the wider business communities throughout the UK.”
SPOA president John Sibbald said: “Now that the dust has settled and the Scottish Plant Owners Association has had time to take stock of the recent budget announcements, it is with dismay and without hyperbole that we fear for the plant hire industry in Scotland.
“The recent budget was described as one of growth. However, we fear that the economic impact of many of the policies will do the exact opposite in our industry. It is our strong belief that it is not possible to grow the economy through such high levels of taxation, soon to come into force as a result of the autumn budget. We are therefore calling on all of our members to lobby their local MPs to highlight the risk to the plant industry in Scotland which employs over 42,000 people and contributes £7.4bn to the economy.”
A recent study for the CPA by Oxford Economics found that the construction plant-hire sector contributes £14bn and 191,500 jobs to the UK economy.
The SPOA is particularly concerned about the impact of the removal of 100% business property relief (BPR) and agricultural property relief (APR).
Plant hire companies are predominantly private independent businesses that are heavily invested in expensive assets and property, which take them significantly over the £1m allowance for 100% BPR or APR.
Due to year-on-year investment in their business to stimulate growth, business owners will not typically have the cash reserves for a one-off inheritance tax event, the SPOA said. In order to generate the cash to pay for this tax, plant hire families will likely be forced to sell all or part of their business. Firstly, there would be an impact on the pool of likely buyers and the valuation of the business effectively being forced to sell. Secondly, it would result in redundancies as administrative functions would be combined regardless of the buyer.
Those businesses that are able may choose to burden their company with additional debt to pay off the inheritance tax (IHT) liability. This will only serve to curtail future growth and stability of the business.
Some businesses may decide to sell all their assets at auction. This would lead to the closure of the company and redundancies, after generations of providing employment in a community.
While it is possible to transfer a business seven years before death and incur no charge, the burden simply passes to the next generation. No amount of planning can safeguard against the unknown and an unforeseen, sudden event could leave a company and its employees stricken, the SPOA argues.
A final whammy on the plant hire sector is that double cab pick-up trucks – a basic tool of the trade – can no longer being classed as goods vehicles.
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