Posted 14 December 2012
A monthly comment from a member of staff at Harper Adams University College
Charles Cowap, Principal Lecturer in Land Management
“The countryside did not shriek from the Autumn Statement headlines, but if you look hard enough there are some useful points. The taxman is going to give us more help with buying big kit from January, it won’t be as expensive to drive as we feared, and tax red tape should be less of a knot for small rural businesses. But farmers’ pension plans – so important to succession planning – have taken a hit and the usual farming arrangement of a family partnership or sole trader status continues to be at a disadvantage compared with limited company status.
The temporary rise in the Annual Investment Allowance is excellent news. This had been much reduced for the current tax year, from £100,000 to a mere £25,000. This is the amount which a business can write off straightaway against its income for the purchase of new plant and machinery. It is going back up again from January 1, 2013, to £250,000 for two years - its highest value yet. There has however been no change in the rate of annual writing down allowances on plant and machinery pools after the first year, still down at a meagre 18%. Nor do we see a return of the old Agricultural Buildings Allowance which would have been a great help with some of the catch-up reinvestment needed in many farm buildings after years of neglect.
The cancellation of January’s fuel duty rise will also be good news, meaning we won’t see another hike in road fuel prices of 3.02p/litre. April’s rise has also been postponed until September. Government has also committed itself to look at an extension of the Rural Fuel Rebate which now applies in the remote Scottish islands, to consider whether it should apply in other remote rural areas.
For rural traders who work through limited companies, the main rate of Corporation Tax drops to 21% for the 2014 financial year (it should have been 22%), and the small profits rate (likely to be more applicable to most rural incorporated businesses) stays at the anticipated 20%.
Smaller rural businesses should also take a look at the new ‘cash accounting’ proposals. Businesses with receipts of up to £77,000 will be able to opt for cash accounting for their Income Tax liability from April 2013 – so no need to account for debtors, creditors, prepayments, accruals, opening and closing valuations. Once ‘in’ it will be possible to stick with cash accounting up to annual receipts of up to £154,000. This could be a tremendous simplification for the smaller rural sole trader, although perhaps less welcome news to accountants. There are also proposals to allow some expenses to be covered by standard deductions rather than actual expenditure. Whether this is good or bad will depend on the allowable deductions – details are awaited, but if the flat rate allowances are generous enough this could also be a welcome saving of administrative effort for the smaller, or start-up, enterprise. If the existing VAT flat-rate schemes are anything to go by it won’t be too generous as an alternative.
Other key points:
• The Inheritance Tax Nil Rate Band goes up to £329,000 in April 2015 from its current £325,000 where it has languished now for a few years
• Empty Property Relief from Rates will be available for newly-built commercial properties, completed between October 1, 2013 and September 30, 2016 for up to 18 months from completion
• There is a temporary doubling of the rate of small business rate relief for 12 months from April 2013
• Static caravans will be subject to 5% VAT from April 6, 2013
• Employee share ownership schemes will be able to give employees £2,000 worth of shares, effectively tax free, and employees will be exempt from CGT on the first £50,000 of disposal proceeds from the sale of such shares
• New regulations will be subject to a “1 for 2″ rule: the cost of the new regulation will have to be offset by twice as much in savings from the abolition of old regulations (watch for some clever government accounting here);
• Annual exemption from CGT goes up to £11,000 in 2014/15 and £11,100 the year after that
• TUPE Regulations (Transfer of Undertakings, Protection of Employment) are to be reviewed with a view to simplification/reduction of impact on employers (presumably with a bigger impact therefore on employees)"
Follow Charles on Twitter - @charlescowap