There was a small increase in the nil rate band of inheritance tax, up by 8,000 to 242,000. However, potentially exempt transfers, where the donor must survive for seven years to benefit from the allowance, is retained.
Business and agricultural property relief stay the same. For most assets, these remain at 100%, but for businesses with partnership structures, land owned personally is only entitled to 50% business property relief.
LIMITED LIABILITY PARTNERSHIPS
Limited Liability Partnerships (LLP) will be possible from 6 April 2001, and may be an appropriate trading vehicle for a farmer where a joint venture is appropriate. For example a farmer who wants to diversify by letting surplus buildings for use by a separate business, but wishes to retain the capital gains tax and inheritance tax advantages of holding a trading asset rather than an investment asset.
The taxation of an LLP is broadly the same as for a partnership, although anti-avoidance legislation has been introduced where the LLP will be used for investment or property investment purposes.
REDUCED RED TAPE ON ACCOUNTS FOR TAX PURPOSES
There is to be consultation to bring the taxable profit of small businesses more in line with the profits figure presented in the accounts. This will be a welcome simplification on the current regime, but will not be introduced until next year at the earliest. It will be interesting to see how the Inland Revenue protect against depreciation and losses being anticipated earlier than they would currently accept.
The proposed simplification of the VAT regime will have little effect on most farmers, who tend to make monthly repayment claims.
The small increase in the registration threshold to 54,000 and the proposed introduction of a flat rate scheme for businesses with a turnover up to 100,000 is to be welcomed for those businesses where net VAT is payable, rather than recoverable.
With low agricultural incomes, the increase in the Working Families Tax Credit by 5 a week from June 2001 may be of use to some farmers. Unfortunately it only applies to those with less than 8000 capital outside the core farming business. With so many farmers diversifying into letting surplus property, this is likely to be of limited benefit.
REDUCING TRANSPORT COSTS
Having been faced with political revolt after the fuel crisis last autumn, the Chancellor announced many measures to reduce transport costs in the Autumn statement. These have been confirmed in the Budget and include:
- Abolition of the 40 VED on tractors, backdated to 1 March 2001
- A reduction in lorry VED, which should reduce transport costs
- A reduction in the duty on ultra-low sulphur petrol by 2p per litre and 3p per litre on ultra-low sulphur diesel, as expected
For employers, the increase in the National Minimum Wage, maternity pay and parental leave will increase employment costs.
- Budget- Key points, FWi, 07 March, 2001
- Budget scraps spray tax plan, FWi, 07 March, 2001
- Farmers hope for Budget respite, FWi, 07 March, 2001
- Green tax would rub salt in wounds, FWi, 05 March 2001
- Pushing alternative to pesticide tax, FARMERS WEEKLY, 02 February, 2001