|
 Andrew Arnott of Saffery Champness
Commenting on the Chancellors’ Emergency Budget Speech (today 22/06/10), Andrew Arnott, a partner in the Landed Estates & Rural Business Group at accountants Saffery Champness, says: “While the main measures of the Emergency Budget were predicted to be on severe cuts to the public sector, there was a relatively soft landing in terms of some of the expected tax rises”.
Farmers and landowners will be surprised that Capital Gains Tax will rise to only 28% rather than 40% or even 50% as was widely expected. However, for higher rate taxpayers (paying tax at 40% or 50%) the flat rate of CGT has been increased to 28% immediately, but will remain at 18% for basic rate taxpayers. The substantial exemptions for business assets come in the form of an extension of Entrepreneur's Relief (at 10%) to be extended to the first £5 million of lifetime gains – a generous exemption indeed.” “For higher-rate tax payers, the news that the Chancellor has increased CGT to 28%, rather than the widely expected 40% will be greeted with a mixture of surprise and relief. However, the differential between the top rate of CGT and the top rate of income tax is now 22%, meaning that there is still a strong incentive for higher-rate tax payers to convert income into gains – a practice the government had wanted to stamp out. “VAT will increase to 20%, although VAT-exempt items will remain so. While almost all commercial farms will currently recover VAT, the additional rate could cause cash flow problems for some farms and rural businesses”.
“Employers' National Insurance Contributions will take effect from a higher level of wages, preventing a fiscal brake on job creation for salaries up to around £20,000.This is unlikely to impact adversely on most farms and estates. There will also be a £5,000 exemption from employers' National Insurance for new businesses outside the South East of England, which is intended to drive economic growth in some of the areas that most need it”. “The main Corporation Tax rate (currently 28%) will be reduced by 1% each year to lead to a rate of 24% in 2014/15, though this will be paid for in part by cutting Capital Allowances by 2% and the Annual Investment Allowance from £50,000 to £25,000. The cut in the allowance will clearly affect those farmers buying new tractors and combine harvesters” One of the most welcome announcements in today’s Budget is that the proposals, by the previous Government to remove the tax benefits of furnished holiday accommodation are to be scrapped. This will be a relief for farmers and landowners who have diversified their business into holiday letting. Along with the lower than expected rise in CGT, this will be a relief for owners of holiday letting properties”. Andrew Arnott concludes: “Overall, the Chancellor has made some good decisions, with no particular sector bearing the brunt of tax increases. Landowners and farmers will remain relatively unscathed with perhaps the reduction in the Annual Investment Allowance being the major issue. The re-introduction of Furnished Holiday Letting rules is clearly most welcome. Whilst the CGT rate increase is unwelcome, it is less onerous than anticipated, and falls on those people with incomes in the higher rate bands. Ends For further information, please contact: Andrew Arnott (Saffery Champness London): 020 7841 4000
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
|
Farm finance & grants 
