Tax penalties unfair

19 March 1999

Potato firm merger will create biggest supplier

By Robert Harris

TWO leading potato firms are to merge early next month to become the UKs biggest supplier.

Greenvale Produce will combine with co-op Anglian Produce to form Greenvale AP plc.

Each company has a grower base of about 8100ha (20,000 acres), producing a combined total of more than 800,000t of potatoes a year, or 12% of UK production. Turnover will exceed £150m.

Provisional agreements were signed 10 months ago, and the deal was expected to have been finalised last June. The delay was due to the legal complexities of combining a co-op with a recently formed management buyout company in the most tax-efficient way, says AP managing director, Stuart Smith.

"This is major step forward for our growers. Being part of a larger business will give us huge breadth and depth. We will have nine different specialist sectors, which will give members a bigger share of premium prices."

Sectors include two pre-pack grades, specialist processing, crisping, French fries, import and export and seed. "Customers will benefit from an expanded, improved procurement base for their product requirements," says Greenvale managing director, Alan Owens.

The new company will have more than 650 staff on its 13 sites across the UK.

To prepare for the merger, AP has been converted into a limited company, with growers becoming shareholders. A 96% majority has now voted to swap shares for new ones in Greenvale Produce, which has recently been converted to a public limited company. The final stage will be the official name change on April 7.

Almost 3m preference shares worth £1 each will be distributed among AP growers, paying a dividend of 8.5p a share. Those growers marketing all their crop through the new company will receive convertible shares.

Provided Greenvale AP performs as expected, these will be converted to a maximum of 250,000 ordinary shares after three years, 25% of the companys share equity. &#42

NFU says support vital rural wealth creators

FARMERS are vital creators of wealth in rural areas and should be supported through development programmes to maintain a vibrant rural economy, says Bob Forster, NFU West Midlands regional director.

"For every one job in agriculture, there are five other jobs reliant on that person staying in business.

"On average, every farmer deals with 70 other businesses and 96% of those are based within a 15-mile radius," he says.

Over £1bn is generated in the rural areas of the West Midlands, which make up 80% of the region and most of it is ploughed back through local goods and services, he maintains. If farmers go out of business, the knock-on effect can be devastating.

Long-term subsidies have "consistently failed" to safeguard the family farm. Over one-third of farmers in the area qualify for income support, though few claim it, says Mr Forster.

He believes development of skills and of physical assets like buildings and land is the best way to create value, thereby increasing income and jobs. &#42

Wayleave cash rise

LANDLORDS and owner occupiers will receive higher electricity wayleave payments from Apr 1 in line with the deal struck between electricity companies and farmer organisations three years ago.

Landlords now receive £4.40 for a single pole, an increase of 3.6%. Tower payments are up by 10%, to £35.95 for a structure with a 9.1sq m base, and to £91.80 for one with a base of 18.3sq m.

Owner occupiers benefit from both landlord and occupier payments (see table), so they also receive more money. But occupier rates (which can be calculated by deducting owner payments from the owner occupier payments) remain unchanged. &#42

Organic change a great chance

GOING organic is one of the greatest opportunities available to dairy farmers today, says Cheshire based cheesemaker and Axient chairman John Beckett.

Speaking at a recent Lloyds TSB/Bath and West milk conference in Somerset, he said: "I am appalled that everyone looks at it as difficult. It is the only food brand recognised by all consumers. If we dont meet the demand, our competitors will."

Lloyds TSB agricultural manager Ian Stockley was less enthusiastic. "Were in danger of talking up organic on the basis of emotional responses. We have to develop it on the basis of scientific principles. We delude ourselves if we think we have a mass market for organic products at premium prices."

Conventional producers would continue to suffer unless there was a significant change in the way milk was sold. NFU deputy president, Tim Bennett, said: "UK dairy farms have the best economy of scale. We give our advantage away when we sell our milk. There was an urgent need to invest in effective processing," he added. &#42

Tax penalties unfair

MANY farmers are penalised by the new self-assessment system for income tax when averaging profits.

The rules on payment and charging of interest on tax are unfair and wrong, says Selby-based accountant David Ingall of J W Pickles & Co.

The averaging system allows a taxpayer to average backwards, which many are now doing following a large fall in profits for trading years ended in June, September and December 1998.

The effect of this is to reduce the taxable profits of the previous and more successful year, on which they have already paid income tax.

The repayment which this creates is not available to the taxpayer until Apr 5 1999 at the earliest, nor is interest payable on it because the revenue argues that it is tax for the current year and not the 1997/98 year.

So, while farmers may be facing cash flow problems, at the same time the Inland Revenue is sitting on a repayment which could run into several thousands of £s, says Mr Ingall.

"Our experience from last year is that perhaps the application of interest would make the system fairer when dealing with repayments," suggests colleague Russell Smith. "Sometimes the repayment is not paid for nine months or so, which is annoying for the farmer if he has paid his tax on time and then had a bad year or two." &#42

Owner occupier Owner

arable grassland hedgerow

Pole 15.67 6.07 5.00 4.30

&#42 pole 18.95 8.48 7.07 5.50

Stay 10.90 3.19 2.85 1.10

Tower*2.6sq m 38.15 19.14 .n/a 13.759.1sq m 84.18 53.08 .n/a 35.9518.3sq m 179.57 122.83 .n/a 91.80

PB double-unstayed 42.19 24.42 23.79 20.65

* taken from a collection of 13 different tower sizes

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