NFU Scotland puts industry fears to Chancellor

NFU Scotland has sent a list of issues to the new Chancellor Alistair Darling which include road tax for essential farm vehicles, investment in agricultural buildings and encouraging new entrants to agriculture.

In a letter sent this week, NFUS president Jim McLaren  has set out a series of concerns with the current tax system and its effect on rural communities. 

The main points are:

Road tax:  In the last budget, the Vehicle Excise Duty for band G cars was raised from £215 to £300.  This is set to rise again to £400 from 2008.  NFUS criticises the move on two counts. 

Firstly, it hits farmers and other rural dwellers for whom these larger vehicles are essential. Secondly, it is simply a revenue-raiser because it is not enough to encourage city-dwellers to switch to ‘greener’ cars.

Agricultural Buildings Allowance:  This allowance is to be phased out, with its eventual removal by 2011.  In effect, this means that farmers who have invested in an agricultural building in recent years will find they will not receive the tax break they had budgeted for.

New entrants:  The price of purchasing land is a significant block to new entrants coming into agriculture. However, renting land is a more viable financial option, yet the taxation system creates a disincentive for current owners-occupiers to let land.

This is because rental income is treated as ‘unearned’ rather than ‘earned’ income.  It therefore loses out under allowances relating to income tax, capital gains tax, inheritance tax and VAT.

Mr McLaren said: “The doubling of road tax for new, larger vehicles over the next year is going to further hammer essential users like farmers, yet do nothing to persuade the ‘Chelsea Tractor’ drivers to switch to greener vehicles.

“The scrapping of Agricultural Buildings Allowance is completely unjust. Farmers have invested on the basis of this tax allowance and are now being retrospectively penalised.  The phasing out of ABA makes a mockery of sound business planning, something ministers have preached to the industry about.”