Revenue inspectors close tax loopholes
By Tim Relf
WATCH out – Inland Revenue inspectors could be on their way to your farm.
That is the warning from accountants Grant Thornton, who predict investigations will rise following the Chancellors budget-announced "spend to save" plans. These aim to tighten up collection and close loopholes.
"Attention has shifted from large companies to owner-occupied businesses," says the firms tax manager Carlton Collister. "In farming, for example, there is more room for stock valuations and allocation of expenditure between private and business uses in the case of vehicles or farmhouses."
And the Revenues growing emphasis on valuations will be used as a "doorway" into full investigations, he suggests.
While the BSE crisis has complicated matters, inspectors should accept that beef incomes will fluctuate. "They wont, however, expect to see such variation in the arable and dairy sectors."
Arable farmers, in particular, could be vulnerable, with a greater degree of choice as to when they time sales. And the switch to self-assessment – involving a transition year – will mean there is the temptation to defer sales going into this period, and accelerate them coming out of it.
"While this is perfectly legitimate, farmers must be able to prove that it was done for a commercial, rather than solely a tax, motive."
A note in a dairy as to what was done when – and why – could later prove useful, as could having acted on professional advice when selling a crop, for example.
This change to self-assessment could lead to unexpectedly high bills in early 1998.
In addition to the first payment "on account" for the following 12 months, a balancing item from previous periods could also be due.
IACS payments will have arrived before this bill is due, says Mr Collister. "But there are cash-flow implications and many farmers are not aware of them."n