Reform threatens exemption loss

LOSS OF exemptions and greater exposure to tax liabilities may be incurred by producers changing farm businesses to cope with CAP reform.

Rose Rowland, of Cheshire-based accountant Howard Worth, says tax planning must go hand-in-hand with business planning if liability is to be managed effectively.

Producers planning to supply commodity outlets would need to reduce costs to be competitive, and changes to tax status could help, she said.

Changing to limited company status might be advantageous.

Producers choosing a high quality, value-added route to generate income could increase their exposure to tax depending on the venture‘s success.

But those moving to non-food production were potentially at greatest risk.

“Agriculture enjoys a raft of exemptions that may be lost if the Inland Revenue deemed the business to be outside of its current criteria for farming.”

These included zero-rated status on outputs for VAT, profit-averaging, agricultural building allowances and agricultural property relief from inheritance tax.

Losing these could mean a business would be no longer viable.

“Tax planning should therefore be an integral part of the decision-making process for all farm businesses,” she warned.

Are you, like many other farms, missing out on tax claims for R&D?

If you’re a limited company, you could be eligible for tax credits if you’re carrying out R&D on your farm. For more information and to find out if you’re eligible visit our R&D tax credits page.

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