The Chancellor’s Autumn Statement announced some really valuable tax benefits along with, on the other hand, some potentially crippling developments. Old Mill’s Dan Knight explains.
For many hardpressed producers, confirmation of the extension of farmers’ averaging from two to five years will be a huge relief. The new rules are flexible, and come into force in April this year. Pressure With farm incomes under tremendous pressure this year, it will be extremely valuable to be able to roll forward profits from as far back as 2012/13 and average them across the years. In many cases, farmers will be able to reduce their income tax bill in 2016/17, or potentially even claim a rebate.
The Chancellor’s Autumn Statement announced some really valuable tax benefits along with, on the other hand, some potentially crippling developments. Old Mill’s Dan Knight explains. Another welcome change is the increase in employment allowance – which reduces employers’ National Insurance Contributions on staff wages – from £2000 to £3000 from April 2016. However, there is some devil in the detail as the allowance will no longer be available to companies where the director is the sole employee. Further consultation may also prevent it being available for husband and wife companies.
Those are the good bits, and now for the not so good ones. It is 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. Changes to the Annual Tax on Enveloped Dwellings (ATED) will affect a huge number of farming companies. This is targeted at companies with an interest in residential properties – either as an owner or a tenant.
ATED currently applies to residential properties which are valued at more than £1 million but, from April 2016, this will reduce to just £500,000. There are a number of reliefs available for properties which are occupied by employees or non-family members – and these could be extended, but in order to claim them you must file an ATED return each year.
Stamp duty Another major announcement by George Osborne was a proposed extra 3% Stamp Duty Land Tax charge on the purchase of additional residential properties from April 1, 2016. This is likely to include buy-to-let properties and second homes. It will be interesting to see if there might be antiavoidance provisions to restrict the purchase of properties in the names of other family members.