CLA in plea for simple tax changes
THE COUNTRY Land and Business Association is pressing Chancellor Gordon Brown to introduce some simple tax changes to boost the rural economy.
The CLA recently sent a copy of its new report, Reform to Perform, to the Treasury.
It points out that while successive Budgets have offered help to incorporated businesses, they have ignored the plight of sole traders and partnerships that predominate in the countryside.
At the show, CLA deputy president Mark Hudson said: "The report contains specific recommendations to simplify taxes for small businesses to increase enterprise."
Key among these is the need to revise income tax rules that impede profitable diversification. At the moment, income from property and land is taxed under Schedule A, while trading income is taxed under Schedule D.
Generally, losses from one category cannot be carried forward and used against income from the other. This means that farmers and landowners often face big tax bills from diversification, such as let office space in farm buildings, because they cannot include losses from farming activities to reduce overall income.
"All activities carried on as a single economic enterprise should be treated under Schedule D," said Mr Hudson. "When agriculture is losing money year on year, there is a real need for this."
The report also calls for a change to the way the taxman treats the cost of repairs to upgrade assets, such as redundant farm buildings for office lets.
Such expenditure is treated as capital for tax purposes, so it cannot be used immediately to offset income. The CLA wants to see such costs reclassified as repairs, which can be.
The CLA also wants to reduce the risk of landlords facing bigger Inheritance Tax bills if they allow tenants to diversify. It is pressing for the meaning of agriculture to be widened for the purposes of agricultural property relief so non-agricultural diversification would qualify for 100% relief from IHT. Such diversification is currently classed as business property, which only qualifies for 50% relief.
"And, if enough diversification occurs, the landlord may lose APR on the entire let holding," said Mr Hudson. *
Simple tax changes would help small rural businesses to flourish, says the CLAs Mark Hudson.