The Chancellor’s Autumn Statement was something of a “poisoned chalice” for farmers, mixing some really valuable tax benefits with other, potentially crippling, developments, according to the West Country accountancy firm, Old Mill.
While welcoming both the confirmed extension of tax averaging from two to five years, and a useful increase applied to employment allowance, Old Mill’s Victoria Paley highlights other autumn statement measures which she believes are distinctly less helpful to the industry.
On capital taxes, for example, she points out that it’s now proposed that from April 2019 Capital Gains Tax (CGT) arising on the disposal of residential property must be paid within 30 days of completion rather than up to 22 months after the sale.
“This is likely to put pressure on getting paperwork in order, and where properties are gifted and a CGT liability arises, there will be far less time to raise the funds to pay the tax,” said Ms Paley (pictured above).
She also draws attention to changes to the annual tax on enveloped dwellings (ATED), a measure which will affect a “huge number of farming companies”.
“This is targeted at companies with an interest in residential properties, whether that’s as an owner or a tenant,” she said. “ATED currently applies to residential properties worth more than £1m, but from April 2016 this will reduce to just £500,000. There are a number of reliefs available and these could be extended, but in order to claim the relief you must file an ATED return each year.”
ATED reliefs include where properties are occupied by employees, provided they don’t have an interest in the company, or where they are let to non-family members. There is also a farmhouse relief, providing the occupants work in the business for at least 20 hours a week.
“The tax charge ranges from £3,500 a year to over £200,000, depending on the value of the property, so it’s essential that farmers evaluate their position and get their ATED return in on time,” said Ms Paley.