FARMERS SHOULD take steps to avoid being hit by high tax bills from new CAP schemes, warns accountant Tenon.
 
Arable farmers who usually defer arable area payments to put back the tax payment date will not be able to do that with the new single farm payment.
 
This means they could be taxed on two aid cheques in 2005, said Mike Butler, national director at Tenon Rural Services.
 
“Deferring cereal subsidies relies on the principle that the subsidy supported the sale of the crop,” he said.
 
“If the crop was not sold at the end of the year, then the subsidy did not need to be recognised in that year.
 
“The new payments are fundamentally different and their payment is in no way related to production of crop sales.”
 
Dairy farmers could also be hit.
 
It is unclear whether the dairy premium scheme, based on quota held on Mar 31 2004, will be treated as farm income when paid in November 2004.
 
If not, that could affect farmers‘ ability to average payments to reduce their tax bills.
 
“Planning is vital, making sure that any necessary changes are put in place in time to cover potential tax bills,” said Mr Butler.