Bitter blow for Dairy Farmers of Britain creditors

Farmers caught up in the Dairy Farmers of Britain collapse last year will not, in the main, be able to use the capital losses they incurred to offset either income tax or capital gains tax, HM Revenue and Customs has confirmed.

A statement from HMRC explains that the losses suffered by DFoB members on their Loan Stocks are not allowable, and neither are debts from Members Liability Loans, Member Capital Accounts and Member Investment Accounts.

Similarly, where such debts were converted into A Ordinary Shares in March 2009, these are assumed to have had a market value of £ zero, and so cannot be used to offset capital gains.

“The only capital losses which appear to be available are losses on the £5 Ordinary shares, the B shares and on A Ordinary shares received in exchange for preference shares,” said the HMRC statement.

It also confirms that capital losses cannot be used as relief against income tax. “In general, only losses incurred on trading account, such as unpaid milk cheques, are allowable against profits charged to income tax,” it said.

The NFU has expressed its “bitter disappointment” at the decision, which will heap further woe on farmers who have typically lost about £15,000 each on their share of investment accounts.

“It seems logically inconsistent to suggest that tax relief is unavailable on the A shares issued in March 2009 because they had little or no value when issued, while at the same time stating that these shares fully satisfied the debts due to members on their Member Liability Loans, Member Capital Accounts and Member Investment Accounts,” said NFU dairy board chairman, Gwyn Jones.

“This position must be challenged and we are already seeking further discussions with HMRC on this matter. We will also be seeking further clarification on the position for corporate members, as the current guidance only relates to individual members.”

* Full details can be found on the HMRC website