Milk Link members need to act quickly to minimise tax on the cash they have recently received following this month’s merger with Arla, advises accountant Old Mill.
About 1,600 Milk Link members have recently received a shared payout of more than £31m – an average of almost £19,400 – following the cancellation of their qualifying loans to the co-op.
In most cases this will be treated as a capital gain for tax purposes, which could be charged at a tax rate of up to 28%, said director Andrew Vickery.
However, with tax, one size definitely does not fit all, he warned, urging farmers to take advice.
Ways to minimise the tax payable include:
• Make sure annual personal CGT exemption of £10,600 is used
• Offset trading or capital losses against capital gains in same financial year
• Possibility of selling milk quota to crystallise losses, buying it back to retain it for future use – beware of this route if business structure has recently changed or may soon change
• Consider delaying (into the next tax year) sales or gifts of other assets which may give rise to CGT charge to make the most of annual exemption
• Beware restrictions for those with limited company structure
• Entrepreneur’s Relief available in some cases – but advice needed