14 November 1997

NFU presents shopping list of tax reforms to chancellor

WITH less than two weeks to go before the governments "green Budget" – setting out proposals for the real thing next spring – the NFU and CLA have submitted their annual shopping lists of tax reforms for the rural economy.

In a letter to chancellor Gordon Brown, NFU president Sir David Naish expresses his concern about falling levels of investment in agriculture, pointing to this years four green £ revaluations and the effect of this on farm incomes.

"In real terms, farm incomes fell by 10% in 1996 and we can now identify a significantly sharper fall in 1997," he says. "When incomes are at an inadequate level, cash flow may be insufficient to finance investment."

To maintain efficiency, as well as to ensure proper pollution control, animal welfare, water management and conservation, investment must be nurtured, says Sir David.

As such, the NFU is calling for 100% capital allowances on the first £50,000 invested in:

&#8226 Dry sow accommodation, poultry units and on-farm slaughterhouses.

&#8226 Meeting the requirements of nitrate vulnerable zones.

&#8226 Developing on-farm water storage.

Expenditure above the £50,000 threshold should then be written off at 25% a year.

On the subject of inheritance tax – widely tipped to be in for a big shakeup in the Budget – the NFU stresses the importance of maintaining the current 100% relief for family businesses and farms. "It is vitally important that businesses should be able to operate in a relatively stable fiscal environment."

Sir David also calls for a simplification of the capital gains tax system. In addition, the NFU recommends that milk quota should be assessed for capital gains based on its 1984 market value – when it was first introduced. Currently 1982 is used, giving milk quota a base value of zero. Any sale is, therefore, considered to show a 100% gain for CGT purposes.

Rollover relief should also be extended to let land, says the union. And it is also supporting the concept of the "rural business unit", as advocated by the CLA since 1992, so that the income from diversified activities on a farm or estate is treated the same as agricultural income. This would encourage diversification and ease administration, it claims.

Many of these points are taken up by the CLA in its submission to the chancellor. In particular, it calls for extra capital allowances for investment in pollution prevention measures, such as clean and dirty water separation.

And any expenditure by landowners on environmental and conservation works, for example maintaining redundant buildings, hedges or shelter belts, should be an allowable expense against income tax, says tax specialist, Adrian Baird.