Torbay housebuilder warns threats to family firms

A family-owned Torbay-based housebuilder has warned business growth will be hit by the Government’s inheritance tax changes, which will impact on family firms as well as farmers.

Torquay-based Cavanna Homes, which celebrated its 100^th anniversary in 2023, is ready to play its part in helping to meet the Government’s pledge to build 1.5 million homes in the next five years.

But Chair Keith Miller said the reforms to Business Property Relief, announced by Chancellor Rachel Reeves in the October Budget, would have a negative effect on its expansion plans and “stump growth.”

The company, which builds new homes from Cornwall to Dorset and is committed to helping to meet property needs in the South West, had hoped to increase the number of houses it builds from 250 to 350 a year.

Mr Miller said the inheritance tax changes could thwart those aims. “If shareholders stop reinvesting profit due to the risk of BPR then we will not be able to do this in future,” he warned. “If this tax comes in, it will in all likelihood mean we will actually build fewer houses because we won’t have the working capital to do the same or more.”

Above: Keith Miller

He said the housing market in the South West was a “bloody battle” due to a range of pressures, including the hike in employers national insurance contributions which will add £120,000 to Cavanna Homes’ wage bill.

He warned that the ending of Business Property Relief could be the last straw for many family firms. “We have had to deal with Brexit, Covid-19, the recent elections and previous political leaders smashing the economy,” he said.

Jeremy Cavanna, former Chairman and current shareholder of the company said he was “hopping mad” about the changes. He said family shareholders had been happy to invest post tax profits in the business but now faced a significant inheritance tax liability.

“Business Property Relief has been fundamental to the family construction business. This tax change has broken the virtuous circle in which family companies operate,” he said.

The advocacy group Family Business UK told Construction News that it had warned the Government about the importance of retaining BPR in the run up to the Budget but its pleas were ignored. 

BPR was introduced in 1976 to help ensure the survival of a family business after an owners’ death without it having to be broken up to pay inheritance tax.  The changes, which come into effect from April 2026, mean only the first £1m will be protected. After that inheritance tax will be payable at 20 per cent.

Farmers from across Britain have staged a series of protests about the impact of the tax changes on family farms. Now other family businesses are campaigning against the measures, warning of its damaging impact on growing the UK economy.

The Treasury says the majority of family businesses will be unaffected by the changes and that the Government is committed to working with business to unlock more growth opportunities for the nation.