Old Mill Rural Services warn: Don’t let the Tax Man steal precious arable profits
AWith the current rise in commodity prices it is inevitable that tax liabilities on profits for some farmers will also increase. While many arable farmers will be looking to replenish depleted financial reserves, paying extra liabilities to the tax man will provide no benefit to the family business as a whole. Mike Butler, partner with specialist farm accountants Old Mill Rural Services, suggests the only solution is for farmers to look to mitigate their tax in good time to avoid missing out on any opportunities.
For many farmers the fear of paying tax can often result in the unnecessary replacement of farm machinery. In certain circumstances this may be appropriate; however there are other more useful ways of mitigating tax without consuming precious capital. For example, taking advantage of revised pension rules, particularly in terms of the new regulations allowing flexibility with Self Investment Pension Plans and higher contribution limits. Business structure considerations in terms reviewing partnerships and looking to operate as limited companies as part of the overall operation, are all factors to be considered. Farmers Averaging can also provide some opportunities, as can the timing of income recognition in terms of Single Farm Payment and the timing of crop sales.
Mike Butler of Old Mill warns, “It is possible that higher commodity prices will last and there is also the potential for reasonable contracting profit shares, both of which will make tax planning vital to all arable farmers. It is essential that tax planning takes place during, and not after the accounting year, as many mitigation decisions will need to be undertaken before the year ends.”
With most arable farms having now completed harvest, a firm prediction of profits can be obtained. Any work on autumn plantings will only form part of a valuation for the following year and therefore will not affect the current year’s profits. In order to avoid any unwelcome surprises in the future, Mike Butler suggests that all arable farmers work with their accountant to asses their level of profitability and take action now.
Ends.
Press release issued by Danielle Delaney at Publicity Matters. For more information please contact Danielle at danielle@publicitymatters.com or on (01275) 544116.