Mike Harrison - Saffery Champness

 It has been announced that an Emergency Budget will be unveiled by the new Chancellor, George Osborne, on the 22nd June 2010.  With the country edging slowly out of recession and with a need for a rise in taxes to reduce the Government budget deficit, Mike Harrison, a partner at Saffery Champness Landed Estates & Rural Business Group, sets out six measures that could assist the rural economy and limit the adverse affects of tax increases previously announced:-

We would hope to see a new taper relief comparable to that introduced in 1998 which would encourage the long-term holding of property.

While the effective date could be as early as 22 June, it appears logical that, since the increase is to be used to fund the proposed increase in personal allowances, the new measures will be introduced as from 6 April 2011.This would also ensure that the legislation is well thought out before it is implemented.

2. Maintain relief for retirement disposals

Farmers and landowners currently benefit from Entrepreneurs Relief which reduces the effective rate of CGT on selling their business interests on retirement to 10%. This relief is capped and we would welcome extensions to it under the proposed generous exemptions for ‘entrepreneurial business activities’.
However it needs to be remembered that careful drafting will be required to ensure that no general increase in the main CGT rate inadvertently amends the formula that calculates Entrepreneurs Relief.

3. Simplify the pensions contributions tax relief regime

While the Coalition Agreement has not referred to pension contributions made by individuals, the current anti-forestalling arrangements discriminate against those agricultural businesses which suffer from dramatic fluctuations in results, such as arable farms, where it has been difficult for the taxpayer to determine the level of their profits and thus make regular pension contributions. Such individuals should be allowed to return to making irregular contributions.

4. Business Tax

It is widely expected that the Chancellor will reduce the main rate of Corporation Tax down 25%.We would hope to see a similar size reduction in the rate applicable for smaller rural businesses and that the measures are not completely funded by recycling cuts in allowances for the investment in new equipment.

If those measures were to be introduced, at a cost of reduced capital allowances, this would adversely affect those trading within the rural economy, either through partnerships or as sole traders, as it is likely that the capital allowance regime would be similar for corporate and non-corporate businesses.

5. VAT Changes

We would like to see an increase in the partial exemption de minimis limits which have been eroded by inflation. And a reversal of the withdrawal of concessions that allowed VAT reclaims when opting rural commercial property.

In the countryside there are many historic listed buildings which benefit from VAT relief in respect of alterations. However, these do not extend to repairing the fabric of such buildings and we would like to see the reduced rate applied to repairs, especially as it is widely predicted that the general rate of VAT will increase in-line with the rate applicable in Europe.

We would also like to see a review of the flat rate scheme for farmers and extension to its benefits.

6. Inheritance Tax

It is disappointing to see that the proposed increases in the threshold where tax becomes payable has become frozen, particularly with the expectation of inflation rising. We would wish to see increases in the threshold reintroduced to ensure that the value of the so called nil-rate band is maintained.

ENDS

For further information, please contact:

Mike Harrison (Manchester): 0161 200 8383 This e-mail address is being protected from spambots. You need JavaScript enabled to view it