By FWi staff
FARMERS rushing to beat the 31 Jan tax return deadline must ensure they maximise all available tax reliefs triggered by falling profits.
An hour or two considering opportunities is well worthwhile, says Mark Chatterton of Newark-based chartered accountants Duncan and Toplis.
Typical savings for medium sized family farms can amount to £10,000-£12,000, says Mr Chatterton.
The most common benefit for those with lower profits in the 1998/99 tax year is a refund on payments of account (the estimated tax demand) made in January and July last year.
“One client who made £73,000 in 1997/98 knew he was going to make less money, so we reduced payments on account in advance,” says Mr Chatterton.
“However, actual profits in 1998/99 more than halved, so we were able to obtain a refund of an additional £3000.”
Tax averaging, available to unincorporated businesses, can also be used where profits have dropped by 30% or more, or where a loss has been made.
This allows businesses to combine the 1998/99 and 1997/98 profits and use the average for tax purposes. In the above case, this saved a further £800.
If profits are expected to be lower in the 1999/2000 tax year, farmers should ensure they use Inland Revenue form SA303 to reduce payments on account.
The first half is due this January, says Mr Chatterton.
However, it pays to be cautious – reduce payments too much and the Revenue can claim interest on money owed, backdated to 31 Jan, he warns.