Farmers have announced bombshell plans to take Rachel Reeves to court over the hated Family Farms Tax, as they argue she failed to comply with consultation rules around the change. Leading law firm Collyer Bristow LLP served proceedings against Ms Reeves on Monday this week, on behalf of a group of affected farmers and business owners.

Those behind the new legal challenge are arguing that the Government failed to comply with its statutory consultation commitments, as the Treasury only conducted a technical consultation on one narrow aspect of the changes.

They argue that Ms Reeves should have held a much wider consultation, including seeking the views of those affected by the proposed tax hike. If the judicial review is granted and won, the activists are hopeful that the government will be forced to amend its hated tax hike following a wider consultation, and possibly delay the changes coming into effect.

James Austen, a partner at Collyer Bristow, explained: “The Claimants’ position is simply that the Government should be held to its public law obligations on matters of tax policy.

“This Claim does not seek to overturn the Government’s decision to amend APR or BPR but asks that affected individuals and groups can contribute to a proper consultation exercise to ensure the Government has the best possible evidence when developing its tax policy for UK farms and businesses.”

The Tories’ Environment spokesman Victoria Atkins said she backed the move, criticising Ms Reeves’ lack of due consultation.

She said: “Time and time again, this Labour government has brought in destructive policies without proper consultation. That includes the changes to APR and BPR which have brought in a Family Farm Tax and Family Firm Tax.

“Rather than punishing farmers in an attempt to balance their chaotic books, Labour should listen to the experts and make policy decisions based on facts rather than student political theory. After all, it’s our nation’s food security at stake.”

The Chancellor’s tax hike will be challenged in court (Image: Getty)

Farmers have spotted an opportunity to appeal to the Government following its major u-turn on Winter Fuel cuts, and a potential second u-turn on welfare cuts.

Ms Reeves’ plan involved ending the current exemption for farmland from inheritance tax under a policy called Agricultural Property Relief.

APR will now be limited to a value of £1 million, above which IHT will be charged at 20%.

While the Treasury’s sums claimed this would raise £250 million a year, recent estimates suggest it will actually cost nearly £2 billion.

Family businesses slashing investment and jobs will lead to a slowdown in the economy, the research by independent consultants at CBI Economics showed.

Family Business UK, the industry group which commissioned the research, said: “Far from increasing tax receipts into the Treasury and stimulating the economic growth the Government is trying to deliver, the changes to BPR and APR in the October Budget achieve the opposite.”