Consultation failures and the return of legitimate expectation

The reforms to agricultural property relief (APR) and business property relief (BPR), announced in the Chancellor’s October 2024 Budget and now in force, have triggered one of the most significant periods of uncertainty for farming families and owner-managed businesses in decades. From April 2026, full (100%) APR and BPR is limited to qualifying assets worth up to £2.5 million per person. Any excess is eligible only for 50% relief, resulting in an effective inheritance tax charge of 20%.

At the heart of the controversy lies the Government’s approach to consultation. The Chancellor’s decision to undertake only a limited technical consultation on a narrow aspect of the reforms has attracted sustained criticism, not least because it appears to depart from the Government’s own policy on tax consultation. At the time of the October 2024 Budget, the (then in force) 2011 Tax Consultation Framework, set out clear expectations that tax policy should be developed transparently, with early engagement, clearly defined objectives and meaningful opportunities for affected stakeholders to contribute.

A judicial review challenge has now been brought, with the claimants alleging the failure to consult publicly on the APR and BPR changes was unlawful. Central to the claim is the argument that the Government’s departure from its established consultation policy breached the claimants’ legitimate expectation that they would be consulted before the introduction of major tax changes directly affecting them. Legitimate expectation, a public law doctrine, arises where a public authority has represented — through policy statements or a consistent course of conduct — that it will act in a particular way, such that affected individuals may reasonably expect those representations to be honoured.

The 2011 Consultation Framework itself recognises that proper consultation and legislative scrutiny improves the quality of tax law.  Unsurprisingly in the circumstances, the APR and BPR reforms have been troubled from the outset and have attracted widespread criticism. This has led to several ‘U‑turns’ by the Government aimed at softening the impact of what many have described as insufficiently thought‑through rules. For example, when first announced, the relief cap was set at £1 million per person and was not transferable between spouses. 

In December 2024, the Government announced that it would increase the cap to £2.5 million per person and confirmed that it would be transferable between spouses. Although these concessions were welcomed, their late introduction compounded uncertainty for families who were already attempting to plan on the basis of the rules as originally announced. For many, the damage had already been done: professional advice had been sought, restructuring explored, and difficult decisions contemplated, all against a rapidly shifting legislative backdrop.

The concerns raised by farmers, business groups and professional advisers reflect a wider unease across the farming and family business communities. Family farms and privately owned enterprises are central to the rural economy, but they are also uniquely exposed to inheritance tax risk. They tend to be asset‑rich but income‑poor, with land and trading assets that are often illiquid. Reliefs such as APR and BPR are therefore not merely fiscal incentives; they are essential to business continuity and long‑term sustainability. Abrupt changes to those reliefs can force premature asset sales, disrupt succession planning and threaten enterprises that have been built and maintained over generations.

For advisers, the implications are as much reputational as technical. Those advising farming and family business clients have long emphasised stability and predictability in inheritance tax planning. APR and BPR underpin decisions relating to land use, reinvestment, ownership structures and intergenerational succession. Sudden policy shifts — particularly where they are perceived to have bypassed established consultation standards — undermine confidence not only in the reliefs themselves, but in the tax system more broadly.

The judicial review now under way provides a focal point for these concerns. While the substance of tax policy ultimately falls within Parliament’s remit, the courts have a well‑established role in scrutinising whether proper process has been followed. This includes assessing whether consultation obligations — whether statutory, policy‑based or arising from established practice — have been respected. For practitioners, the case serves as a timely reminder that procedural public law principles are not abstract doctrines. They can have concrete and far‑reaching consequences for clients whose financial and operational planning depends on clarity, predictability and governmental consistency.