Autumn Statement is a Poisoned Chalice, Warns Old Mill

The Chancellor’s Autumn Statement proved something of a poisoned chalice for farmers, with some really valuable tax benefits and other, potentially crippling, developments.

For many hard-pressed producers, confirmation of the extension of Farmers’ Averaging from two to five years will be a huge relief, says Victoria Paley, tax consultant at accountant Old Mill.
“The new rules are extremely flexible, giving farmers the choice between averaging over two or five years from April 2016.”


Victoria Paley

With farm incomes under tremendous pressure this year, it will be extremely valuable to be able to roll forward profits going back to 2012/13 and average them across the years.
“In many cases farmers will be able to reduce their Income Tax bill in 2016/17, or potentially even claim a rebate.”

Another welcome change is the increase in the Employment Allowance, which reduces employer’s National Insurance Contributions on staff wages, from £2,000 to £3,000 from April 2016. “However, there is some devil in the detail, in that the allowance will no longer be available to companies where the director is the sole employee,” says Miss Paley. “Further consultation may also prevent the allowance being available for husband and wife companies.”

However, of greater concern are changes to the capital taxes. It is proposed that from April 2019 Capital Gains Tax (CGT) arising on the disposal of residential property must be paid within 30 days of completion rather than up to 22 months after the sale. “This is likely to put pressure on getting paperwork in order, and where properties are gifted and a CGT liability arises, there will be far less time to raise the funds to pay the tax.”

Changes to the Annual Tax on Enveloped Dwellings (ATED) will affect a huge number of farming companies, she warns. “This is targeted at companies with an interest in residential properties – whether that’s as an owner or a tenant.” ATED currently applies to residential properties worth more than £1m, but from April 2016 this will reduce to just £500,000. “There are a number of reliefs available and these could be extended, but in order to claim the relief you must file an ATED return each year.”

Reliefs include where properties are occupied by employees – provided they don’t have an interest in the company – or where they are let to non-family members. There is also a farmhouse relief, providing the occupants work in the business for at least 20 hours a week. “The tax charge ranges from £3,500 a year to over £200,000, depending on the value of the property, so it’s essential that farmers evaluate their position and get their ATED return in on time,” says Miss Paley.

Another major announcement by George Osborne was a proposed extra 3% Stamp Duty Land Tax charge on the purchase of additional residential properties, from 1 April 2016. “This is likely to include buy-to-let properties and second homes. It will be interesting to see if there may be anti-avoidance provisions to restrict the purchase of properties in the names of other family members.”

As ever, details regarding the full impact of the Autumn Statement will take some time to emerge, adds Miss Paley. “However, the risks and rewards of getting it wrong could be considerable, so it’s vital that farmers keep themselves informed and plan ahead to make the most of the benefits available.”

Old Mill

Related Links
link Defra's Settlement at the Spending Review 2015
link TFA holds Constructive Dialogue with AHDB Dairy
link Westmorland Chief Takes Up New Chairmanship
link Christmas GammonWatch to Name and Shame