Farmers face a £6m tax hole in levy-funded research, development and promotion activities, it emerged at today’s Cereals 2007 event in Cambridgeshire.

As part of the levy board restructuring, culminating in the creation of the umbrella body Levy Board UK earlier this year, the Treasury has said the new body, which spans cereals, oilseeds, potatoes, meat, milk and vegetables, must pay VAT and corporation tax.

The unprecedented move would slash £6m from the new body’s projected £58m turnover, which is almost entirely financed through farm-paid levies.

“If this can’t be reversed it would be a huge tax on the industry,” NFU deputy president Meurig Raymond told Farmers Weekly.

“It would undermine all that the new Levy Board UK is meant to do in terms of supporting an industry with failing businesses. We need that research, development and promotion to move the sector forward.”

One leading practical farming company expressed complete shock at the Treasury move. “The industry needs technology transfer, it is what Cereals is all about, and it is what the whole industry still needs.”

He believed DEFRA was on the case and was hopeful the decision could be reversed.

Shadow farm minister Jim Paice echoed that. “It sounds like a typical treasury cock-up, I don’t think it is part of the Brown conspiracy to undermine agriculture that some people seem to believe in. Clearly it is not right. Farmers pay their levies for research – they pay their taxes elsewhere.”

BLOB A call was also made for a review of the way producers who home-feed cereals pay their levy. Jonathan Tipples, newly appointed Levy Board UK cereals and oilseeds chairman, suggested it was unfair that a neighbouring farmer growing 600ha of cereals could use levy-funded advice to optimise output for feeding his own poultry, but paid no levy to fund that work. “What we need is a statutory measure to close this loop hole. I’m 40% certain we can get this sorted.”