Catherine Vickery, rural tax specialist at accountant Old Mill, said she was surprised that taxes were not hiked more sharply. “There were even some extra giveaways, which was amazing.” However, Mr Osborne did announce drastic changes to Capital Allowances, Capital Gains Tax, Income Tax and VAT, all of which would affect rural businesses.

“One of the key changes is the reduction in the Annual Investment Allowance, from £100,000 to £25,000 from April 2012. The writing down allowance for capital expenditure over that level will also be reduced, from 20% a year to 18%.” Although businesses would still receive the same level of tax relief, it would be spread over a longer period of time. “If you do have major expenditure coming up, make the most of your £100,000 annual allowance in each of the two tax years before this change comes into force.”

From midnight yesterday (22 June), Capital Gains Tax (CGT) rates increased to 28% for higher rate taxpayers – considerably lower than the 40-50% rate many expected. Lower rate taxpayers would retain the existing 18% rate, with gains over and above the higher rate income tax threshold of £43,875 levied at the new 28% rate.

“Anyone selling or gifting assets could face higher CGT rates – but those selling an entire business will benefit from the higher band for Entrepreneurs’ Relief,” said Mrs Vickery. The threshold increased from £2m to £5m, under which gains would be taxed at 10%.

Those renting furnished holiday lets were pleased to hear of plans to reinstate tax reliefs like Capital Allowances on furnishings, offsetting losses against other income, and Entrepreneurs’ Relief upon sale of the business. “A lot of people, in the West Country in particular, run holiday lets as a business, and deserve the same tax relief as any other business.”

Another benefit for local businesses would be the planned holiday from National Insurance (NI) for new business enterprises, she added. “Start-up businesses outside London and the South East are to be exempt from NI for first 10 employees, up to £5,000 per person. That equates to a tax break worth up to £50,000 for 400,000 businesses over three years – a valuable encouragement for brave new ventures.”

A £1000 increase in the personal allowance for Income Tax would save lower rate taxpayers £200 a year, while falling Corporation Tax rates, from 28% down to 24% for large companies, and 21% to 20% for small companies, were also to be welcomed, said Mrs Vickery.

However, the increase in Value Added Tax (VAT), from 17.5% to 20% from 4 January 2011, would make the cost of living more expensive. “Given that just a year ago we were at 15%, that is quite a steep rise. It will add to the cost of almost everything, and will make cash flow more difficult for VAT-registered businesses.

“That said, we were prepared for swingeing allowance cuts and steep tax rises in this Emergency Budget. Many of the proposals made by George Osborne were less onerous than expected. Rural businesses now need to ensure they understand the implications of such wide-ranging changes, and take professional advice to mitigate higher tax bills in the future.”

For more information contact Catherine Vickery on 01935 426181, or e-mail: catherine.vickery@oldmillgroup.co.uk.

Speaking at the Royal Cornwall Show this week, associate director Andrew Vickery said many landowners assumed their estates would be eligible for Agricultural Property Relief (APR) from Inheritance Tax (IHT). “However, a series of court cases have highlighted the need for careful planning and documentation. A key feature of cases like Antrobus, McKenna and McCall has been the lack of sufficient documentary evidence of farming activity to support the financial details shown on the related accounts and tax returns. Without this evidence, large parts of the estates became subject to a hefty tax burden.”

For example, older partners in a farming partnership who were seeking to reduce their role in day-to-day operations should keep detailed and regular minutes of partnership meetings to substantiate the input they still made to the business. “They do not necessarily need to have a hands-on role, as their experienced management contribution is deemed equally valid,” said Mr Vickery. “But without actual evidence of this involvement, HM Revenue & Customs (HMRC) could argue that the older partner is no longer actively farming, and his estate therefore no longer qualifies for APR.”

There are numerous other situations where businesses should consider keeping documents in the form of minutes, records or photographs, to support their IHT position. These include:

• Farms which are holding substantial cash deposits on their balance sheet, in anticipation of acquiring land in the future.

• Businesses that have a mix of non-trading and investment assets (such as let properties) but which run all streams of income as one business.

• Farms with substantial amounts of amenity land or woodland in addition to the farmed acreage.

• Businesses with traditional or redundant farm buildings, particularly where planning permission for conversion has been applied for.

“Clearly the above list is not exhaustive but farmers who are unsure whether their entire estate qualifies for APR should take professional advice and keep as many records as possible,” said Mr Vickery. “In many cases some cheap and simple early planning could yield tax savings of several hundred thousand pounds. It can also avoid potentially costly and intrusive scrutiny from HMRC if any queries can be answered quickly and supported by robust factual evidence.”

For more information contact Andrew Vickery – Tel: 01392 214635, or e-mail: andrew.vickery@oldmillgroup.co.uk.

The prizes were awarded to the best presented beef and dairy cattle in the lines, rewarding exhibitors for extra care and attention to how the cattle were shown off to the general public.

Scooping the beef presentation prize were Judith Denning and her daughter Jessica with their Aberdeen Angus cattle from Temple Farm, Bridgwater, Somerset. In the dairy lines, AG Hinks & Sons took the Dairy Presentation Award with their Kingtonmagna cows from Lower Nyland Farm, Gillingham, Dorset. The Hinks family also claimed the reserve champion prize in the Holstein classes, and won the Best Pair, Best Group (pictured) and a string of other rosettes.

Neil Cox, senior manager at Old Mill’s Yeovil branch, presented the prizes. “I am thrilled to award these prizes to such worthy winners, at what has been an exceptional Show,” he said. “Visitors flock to the Bath & West Show in their thousands every year to see the livestock on display, and Old Mill is pleased to continue its support for the Show and the farming community alike.”

Beef Stock Presentation: Judith and Jessica Denning receive their award from Old Mill’s Neil Cox (far right) and Brigadier Hodder (left).

Dairy Stock Presentation: Old Mill’s Neil Cox (centre) presents the dairy award to AG Hinks & Sons’ champion Holstein group led by Claire Miles (left), Fred Stephens and Caroline Hinks (right).

For more information contact Alan Stone on 01749 335007 or alan.stone@oldmillgroup.co.uk.

To help farmers examine the latest technologies from a practical business perspective, it is holding a seminar at this year’s Royal Bath & West Show. Chaired by local farmer and renewable energy guru Archie Montgomery, the seminar will host expert speakers on the economic realities behind a wide range of technologies including bio-digestion, wind farming, solar panels, hydro-electric power and biomass.

Covering everything from small-scale farm projects to larger community options, the seminar also offers the opportunity for delegates to ask questions and to learn about the exciting plans for a Solar Photo-Voltaic power plant on 45 acres of the Bath and West Showground.

“Although a long time in the coming, new technology and government support mean a number of forms of renewable energy are finally becoming a reality,” says Mark Neath, Associate Director at Old Mill Rural Services. “Some landowners have already capitalised on the green revolution, most visibly in the growth of the onshore wind industry. But other technologies are coming to the fore, and the introduction of Feed-in Tariffs means these are now looking increasingly financially viable for smaller scale producers.

“We are pleased to invite all interested parties to attend this free seminar and learn more about what is an emerging and dynamic industry.” The meeting will be held on Wednesday, 2^nd June from 3.30 – 5.00pm at the Old Mill Marquee, fifth avenue, at the Royal Bath and West Show.

It will be followed by free drinks and a buffet. For more information and to book online visit www.oldmillgroup.co.uk/events or contact Alan Stone on 01749 335007 or alan.stone@oldmillgroup.co.uk.

With the new government seeking to tackle the massive budget deficit, Capital Gains Tax (CGT) could become one of Chancellor George Osborne’s targets in his first Budget, warns head of rural services Mike Butler. “Current CGT rates are set at between 10% and 18% – well below income tax rates. It is possible that Mr Osborne will increase CGT to as much as 40-50% in his Budget, which is expected by the end of June.”

Farmers should therefore consider crystallising capital gains now – whether in the form of a sale or gift – to lock into the potentially lower tax rate. “If you are planning to sell an asset in the coming years, it could be worth gifting it to a trust to crystallise the capital gain now, to reduce the liability on its ultimate sale,” says Mr Butler.

Equally, those with loss-making assets like milk quota should defer crystallising the loss until the envisaged higher tax rate comes in, to make better use of their loss relief. “For example, a farmer with £150,000 of milk quota losses could claim £15,000 of CGT saving now under the existing 10% Entrepreneurs Relief. But if they delayed that sale until after the Budget, the same quota could yield a £60,000-£75,000 saving under a possible 40-50% tax rate.

“If CGT rates are set to rise in the short term it is essential to plan ahead and act quickly to secure the optimum timing of asset disposals. Taking professional advice and acting now could save you a vast sum in the future.”

For more information contact Mike Butler – Tel: 01935 709321, or e-mail: mike.butler@oldmillgroup.co.uk.

Following the abolition of Agricultural Buildings Allowances, many farmers are confused about what expenditure does and does not qualify for capital allowances. These provide up to 100% tax relief on repairs, integral features and plant and equipment in buildings, up to a maximum of £50,000 a year. So while the actual structure of a building no longer qualifies for tax relief, farmers can claim against a significant proportion of its contents, says Head of Rural Services Mike Butler.

In addition, following the case of JD Wetherspoon v HMRC, farmers can claim for alteration of existing farm buildings to accommodate necessary plant and machinery. “This allows a much greater proportion of the total building and renovation costs to qualify for capital allowances – potentially including a proportion of project overheads, such as planning fees and project management.”

Many livestock buildings require integral fittings such as stalls, slurry drainage and storage areas, and drinking and feeding facilities – and the alteration of buildings to accommodate these will now qualify for capital allowances. Dirty water systems are also eligible, including rainwater harvesting, which has been clarified as 100% plant and equipment. Expenditure on energy or water saving equipment will also qualify for enhanced capital allowances, which provide 100% tax relief in the first year, with no capped limit.

“Anyone undertaking building projects should not only consider what tax allowances are available for the work they are doing before starting work, but also make sure detailed schedules of work are kept to back up those claims,” says Mr Butler.

Integral fixtures and fittings, including central heating systems, air conditioning, and electric lighting and power, qualify for a 10% annual writing-down allowance. Any expenditure over and above the £50,000 limit for 100% tax relief can be written off at up to 20% a year, although for this year only plant and equipment can attract a supplementary write off of 40% for expenditure incurred up to 6 April, 2009, for partnerships or sole traders.

“Claiming the full amount of capital allowances will be particularly relevant next year, when higher rates of tax may stand at 50%,” says Mr Butler. “Even those who are seeking to become more tax efficient by incorporating the business or engaging a corporate partner stand to make significant tax savings.

“However, with the Government seeking to raise revenues in any way it can we may see further changes and reductions in capital allowances before too long. The goal must therefore be to claim the maximum tax relief as soon as possible.”

Renewable energy has long been touted as an environmentally friendly way to boost farm incomes, but often fails to deliver in terms of profitability. Fortunately, with the launch of new Feed-in Tariffs from April 2010, that picture may finally be changing.

In order to meet targets on reducing Carbon emissions, politicians are backing renewable energy sources like never before. Historically, anyone investing in renewable energy projects had to do so for ‘green’ motives, as the finances simply did not stack up. Hopefully, the advent of Feed-in Tariffs (FITs) will mean such propositions will become financially attractive as well as environmentally sound.

From April, FITs will pay producers for every unit of electricity generated, on top of the revenue raised by selling the power, or using it on the farm. The scheme is similar to those used in Germany and Spain, which have seen an explosion in micro-generating capacity in recent years.

Farm resources

Farmers are uniquely placed to benefit from FITs, having the natural resources available in abundance. Many have already capitalised on the green revolution, most visibly in the growth of the onshore wind industry. However, wind power is unpopular and planning applications can become mired in public opposition.

Fortunately, other technologies are coming to the fore, which are less controversial.

Solar photovoltaic (PV) panels are now more efficient, and attract the highest FIT payments, at up to 41.3p/kWh. Panels can be fitted on the roofs of farm buildings, and may be eligible for grants under the Low Carbon Buildings Programme if installed on a residential dwelling. Alternatively, free-standing installations on farmland can benefit from the latest solar-tracking technology, angling the solar panels towards the sun during the day for improved performance.

Another option is the generation of biogas from farm waste via an anaerobic digester (AD). These use bacteria to break down organic compounds, producing methane, which can be used as a fuel, and digestate, which is an effective fertiliser. This technology is often of particular interest to dairy farmers; who need to manage cattle slurry, and food producers; who have a waste stream with a disposal cost. In both cases, AD can generate an income, minimise waste and reduce costs – a win-win situation.

High capital costs and poor reliability have plagued the AD industry in the UK, but improvements in technology mean it is now becoming increasingly attractive to smaller scale producers.

Other renewable resources include rivers and streams, which may be suitable for small-scale hydro-electric generation, and energy crops for use in AD plants. Biomass projects do not qualify for FITs, although they will continue to be supported under the Government’s Renewables Obligation Certificates.

Anyone considering investing in renewable energy must weigh up their options carefully. Ask yourself:

• Do you want to be self-sufficient in energy or a power station operator?
• Is the project in keeping with the setting and landscape?
• Can the project be matched to the natural resources on-farm or will you become dependent on others for supply of feedstock?
• Do you have a suitable grid connection? If not, there is no point in producing far more power than you need, unless you are willing to bear the cost of upgrading the connection.
• Could the project also help to manage your waste or meet Nitrate Vulnerable Zone regulations? This is a particular benefit of AD over other technologies.
• Investing in renewable technology may require significant capital investment and exposure to a new set of risks. Are you willing to take this on and divert cash and time away from the core business?

Feed-in Tariffs

FITs are set for 20 years (25 years for solar photovoltaic) and will be index linked to account for inflation. There are two components – an export tariff, which is a fixed sales price to remove volatility in wholesale power markets – and a generation tariff, paid for each unit produced, whether used on-site or sold to the national grid.

The generation tariff varies by technology and size of installation:

The broad spread reflects the relative cost of capacity of each technology and is intended to enable a return of 5-8% per annum, or payback within 12.5 to 20 years.

Whether or not the returns are attractive enough to encourage the sort of growth the government is hoping for remains open for debate, and indeed commentators are already complaining that the FITs are too little, too late. However, the cost of FITs will be borne by the consumer through higher energy prices, so there is clearly a need to strike the right balance.

Ultimately, anyone investing in renewable technology must be sure it is right for them and their farming business. Having worked with a number of renewable technology companies, Old Mill is ideally placed to support you through the process. With a detailed understanding of both the technology and its financial implications, we can assist with feasibility studies, budgeting and grant applications. For more information, contact Mark Neath on 01392 214 641.

Farmland, buildings and houses have traditionally escaped Inheritance Tax through agricultural exemptions. But HM Revenue & Customs (HMRC) is targeting these areas in a bid to raise taxes, and farmers need to be extremely careful to avoid the ever-tightening noose.

“We are seeing an increasing number of cases where HMRC is challenging whether farmhouses, agricultural buildings, and even the land itself, should qualify for Agricultural Property Relief (APR),” says Catherine Vickery, rural tax specialist at Old Mill Accountants. “This leaves the farmer’s beneficiaries in a very difficult position of either having to pay up to 40% Inheritance Tax on the asset, or prove its use really was agricultural in the two years before the farmer passed away.”

A common problem is when the farmer has retired, but still lives in the main house. “HMRC is saying that the house ceases to be a farmhouse, and therefore doesn’t qualify for APR. Ideally, the retiring farmer should move out and pass the house down to his children, who are still actively farming. But that isn’t always practical or possible, so it is important to keep the farmhouse as the hub of farming activity – for office work, farm meetings, and so on.

“The retiring farmer should remain active in the business – stay in the partnership and have an input to the daily farm management. It is the function of the house that is important, not the physical tasks you perform – so you need to keep records of all agricultural activity in the house, as proof should your beneficiaries need it.”

The same is true of farm buildings, which HMRC could argue are no longer in agricultural use, says Mrs Vickery. “Keep notes of any building work, photos of the building in use – anything which will back up your argument.”

Sadly, a spate of recent cases has highlighted the difficulties encountered when a farmer is taken ill, and has to leave the farmhouse for a while. “It can be very distressing if a parent is taken into care before they die, and the beneficiaries later discover that the farmhouse doesn’t qualify for APR, landing them with a hefty, and unexpected, tax bill.”

Case law is hazy on how long a house must be out of daily farming use before it loses its agricultural exemption. To be on the safe side, farm workers should continue to use the property for meetings and office work, keeping phone lines open and council tax paid, to show that it is in constant agricultural use.

Another HMRC trick is to restrict the amount of APR to 70% of the farmhouse’s true market value, leaving the remaining 30% liable to tax. “The Revenue’s argument is that a house tied to agricultural use is worth less than if it were on the open market – so the agricultural value of the house should be similarly reduced,” says Mrs Vickery. “However, there are no grounds for such a blanket restriction – every case must be considered separately on its own merits.” Care should also be taken where Bed & Breakfast is offered, as this may jeopardise the APR claim.

A similar tactic affects farmland that is bordered by residential houses. In these cases HMRC is claiming that the neighbours may have been interested in purchasing the land as pony paddocks, adding significantly to its agricultural value. “As in all Inheritance Tax cases, it is difficult to prove something after the farmer has died. Fortunately, the burden here rests on the Revenue to produce written evidence of such interest shown at the time.”

Other possible stumbling blocks include land let for grass keep or entered into the Farm Woodland Premium Scheme. “HMRC claims that land entered into the woodland premium scheme is no longer agricultural, so does not qualify for APR. However, it may then be eligible for Business Property Relief, so take advice before committing yourself either way,” says Mrs Vickery.

With grass keep, the owner needs to be actively managing the land and selling the grass as a feedstock, which is zero rated for VAT purposes. “In all cases of contract farming and tenancies, the more you do and the more the farmhouse is used in the business, the more likely you are to retain agricultural exemptions. Again, keep as many notes as you can, as such agreements are far harder to prove once the farmer is dead.”

It is clear that in the current climate, farmers should not assume that their assets qualify for agricultural tax relief. “If there is any uncertainty over their eligibility, consider gifting those assets to the next generation now, or gather as much evidence as you can to prove that they are still in agricultural use. HMRC is getting very keen on attacking farmers, but they haven’t got any basis to be as tough as they are, so you have to resist – don’t let them get away with it.”

For more information on Inheritance Tax relief, contact Catherine Vickery on 01935 426181.

Lower milk prices during 2009 have eroded dairy farmers’ profits, but cheaper inputs mean many producers will be able to continue rebuilding their balance sheets. And with a number of tax incentives to take advantage of, now could be the perfect time to invest in the business.

Although last year was a turbulent one for the wider economy, it was very much business as usual for many milk producers. A 10% slide in milk prices proved disappointing, and Old Mill expects dairy farm profits to be slightly lower than in 2008/09. Fortunately, some input prices have also eased, offering producers some further recovery after many difficult years.

Fertiliser prices fell significantly, as did domestic feed costs. However, overall feed prices remained stubbornly high due to imported commodities like rapeseed and soya, which proved expensive, partly due to the weaker pound. However, one benefit of the weak pound was its positive effect on the Single Farm Payment, which increased by 15% between 2008 and 2009.

The cost of borrowing also remained low, as a result of the cheap Bank of England base rate. Although some banks took the opportunity to increase their lending margins, many dairies have taken advantage of the cheaper finance to invest further in their units.

Clearly, it is vital to consider how to make such investments in the most tax efficient manner. The Annual Investment Allowance allows businesses to write off the full cost of qualifying plant and machinery expenditure in the year of purchase, up to a limit of £50,000. This can obviously provide valuable tax savings.

However, many dairy farmers are unaware of the additional one-off tax savings available in the current fiscal year. This means that any expenditure above the £50,000 allowance qualifies for 40% relief in the first year, rather than the usual 20%. This is one-year concession runs until 5 April 2010 for sole traders and partnerships, or 1 April 2010 for limited companies, so farmers need to act now to make the most of it.

Those considering investing in agricultural land or buildings have often done so using a pension fund – a particularly popular option for higher rate taxpayers. Even though the cost of borrowing is at a record low, many farmers resent having to repay the cost of their investment out of profits, which have been taxed at up to 40%. By using a self invested pension, the business pays for the project tax-free, saving up to 40% on up-front costs. So a building which would normally cost £100,000 to construct would effectively cost the farmer £60,000 – a healthy saving.

The 2009 Budget dealt a harsh blow to those earning more than £150,000 a year – who will soon be subject to a new 50% to rate of income tax. National Insurance contributions for individuals are also set to rise. However, in stark contrast the Government kept the small companies’ Corporation Tax rate at 21%, leading many of our clients to consider incorporating their businesses.

The potential savings from using a limited company can be dramatic. A husband and wife partnership making profits of £100,000 could save around £7,800 – a 30% reduction in their tax bill. Even with lower profits of £60,000 the saving could be as much as £2,700 – a 22% decrease in tax liability.

Limited companies can also be more efficient structures within which to repay debt. A limited company could be left with 79p in the pound for debt repayment, rather than 59p for a higher rate taxpayer trading as a sole trader or partnership, who would suffer income tax and National Insurance at a combined rate of 41%. Unlike pension contributions and plant and machinery purchases, a limited company structure has the added benefit of reducing income tax liabilities without tying up excess cash.

Preserving cash flow has been critical for all businesses during the economic crisis, and dairy farms are no exception. Many farms will have paid tax at the end of January, based on higher profits shown in their 2008/09 accounts. Sole Traders and Partnerships may have also included a payment on account towards their current tax year. With profits likely to slip during 2009/10, farmers should consider reclaiming some of this payment on account tax from HM Revenue & Customs, particularly where they have reduced profits through hefty plant and machinery expenditure in the current year.

With a general election looming, this year is likely to hold a few surprises in terms of tax changes, but there is much that farmers can do to structure their tax affairs as efficiently as possible. Planning ahead and taking the right advice is key to this, and Old Mill is always pleased to help. For more information contact Andrew Vickery on

01392 214834.

The firm, which also has offices in Shepton Mallet, Yeovil and Exeter, merged with long-established Devizes accountants LE Bull and Co almost a year and a half ago but has expanded considerably since then and needs a new base to accommodate the increase in staff.

“When we merged with LE Bull and Co in November 2008 we had 12 office-based staff in Devizes, this has now grown to 19 and with a need to increase to 25 in the short term the existing offices are bursting at the seams,” explains Mike Butler, Finance Partner at Old Mill.

He continued, “We are moving to the Challymead Business Park in Melksham, where the modern offices will enable us to continue to grow and provide a home for up to 40 staff.”

Mike says the move will enable Old Mill to provide services to a much wider range of local businesses.

“We will now be able to make our proactive accountancy services available to all Wiltshire businesses, large and small and across all sectors of industry,” he said.

“And with the addition of newly appointed IFA Paul Heaphy we will also look to expand the financial planning team that we set up in the region this summer.”

Paul Neate, the partner in charge of the Melksham office, says although he will be sad to leave Devizes, he is looking forward to the challenges that lie ahead.

“We had spent nearly 18 months searching for an alternative office in town but unfortunately there was just nothing suitable available,” he said.

“We will be very sad to leave our offices in Devizes where I personally have worked for 30 years, but look forward to continuing to provide a high level of service to our loyal existing clients and from that base serving many new friends in the future.”

Many producers use self-employed contractors for milking or other services, as it can be cheaper than employing full-time or part-time staff. However, by doing so, they could lose agricultural tax relief on any properties occupied by the contractors, as well as leaving themselves open to paying National Insurance and Income Tax arrears.

“Very often a herdsman who considers himself to be self-employed is actually employed in the eyes of the law,” says Mike Butler, Partner at Old Mill Rural Services. “An individual’s view of employment status is irrelevant – it is a point of fact to be decided by the correct legal interpretation of the facts of the case. And, if a self-employed contractor is in reality found to have been employed, and walks away without paying the duty they owe, the employer will be liable to pay that missing tax and National Insurance.”

Points to consider include whether the contractor shares some of the financial risks associated with the work, what proportion of income they derive from a single client, and whether they personally have to carry out the tasks, or can engage a sub-contractor, for example.

But it is not just Income Tax and National Insurance that the farmer could be liable for. If the contractor is truly self-employed, it has significant implications for relief from Inheritance Tax and Capital Gains Tax. “A farmer who provides a self-employed contractor with a farm cottage to live in could find that the dwelling no longer qualifies for Agricultural Property Relief from Inheritance Tax. Equally, the property could lose its status as a business asset for Entrepreneur’s Relief or Rollover Relief for Capital Gains Tax purposes,” says Mr Butler.

“In those cases the farmer may well end up paying £10,000s in tax, merely to have the comfort of a slightly cheaper self-employed herdsman. Cutting corners is the worst possible option when it comes to tax planning. It is important to get a full and thorough review of your circumstances to ensure that tax liabilities are kept to a minimum.”

Although incomes have fallen this year, many farmers are still paying tax on forecast higher profits, following last year’s improved trading conditions. “While paying tax is often a sign of a profitable enterprise, paying too much tax starves businesses of cash flow, often at times when cash is particularly tight,” says Partner Mike Butler.

“Many farmers have had a reasonably profitable couple of years, leading to heavier tax liabilities. Hopefully, they will have taken advantage of tax planning opportunities like farmers’ averaging, use of pensions or perhaps creating limited companies to reduce that tax burden. Even so, many will still be paying tax on future profits on the assumption that the better times are continuing. Regretfully, that assumption is unlikely to be correct.

“Higher input costs and falling commodity prices mean that profits are likely to suffer for 2009/10 and possibly beyond. With most of the tax system based upon making advance payments on account, those farmers whose profits are falling should reduce their payments on account now.”

HM Revenue & Customs does not usually pay interest on overpayments of tax – and what little interest may be paid will generally come some eight months or more after the end of the tax year. “It is therefore far more sensible to act now to ensure you are paying the correct amount of tax, instead of waiting until you have prepared the year’s accounts, only to find that you need not have paid tax in the first place,” says Mr Butler.

“There are of course other opportunities to mitigate tax if you are facing a profitable year, such as maximising tax relief on plant, equipment and building costs. The key is to have a strong understanding of your business’s position as you go along, and work closely with your accountant to identify the best way forward, before the end of the tax year.”

For more information contact Mike Butler at Old Mill on 01935 709321.

“The Chancellor’s Pre-Budget Report was somewhat surprising in its lack of revenue-raising increases, that many had been expecting to fill the government’s large deficit,” says Catherine Vickery, rural tax specialist at Old Mill. “However, there have been some changes that will impact on farming businesses, particularly the 1% rise in National Insurance contributions for both self-employed and employed workers from April 2011.”

Alistair Darling also announced a freezing of the Corporation Tax rate, confounding expectations of an increase. “These two measures will surely push more farmers into incorporating their businesses, to draw profits via dividends, which are not subject to National Insurance contributions,” says Mrs Vickery.

Other changes announced in the Pre-Budget Report included the well-publicised abolition of Furnished Holiday Let allowances, which will render holiday properties liable to Capital Gains Tax and Income Tax in the same way as other rental properties. “However, early indications are that some of the tax benefits accrued before 6 April 2010 will not be lost overnight, which will be a relief to holiday cottage owners.”

Mr Darling also froze the Inheritance Tax nil rate band at £325,000, rather than increasing it to the proposed £350,000. “If your assets exceed this amount then you should be considering how to minimise your potential Inheritance Tax liability,” says Mrs Vickery. “In all these cases it is a good idea to seek professional advice, to keep as much of your hard-earned cash where it belongs.”

Editor’s Notes

For more information contact:
Alan Stone, marketing manager – Tel: 01749 335007, or e-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services
Old Mill accountants and financial advisers employ 190 staff in four West Country offices. The Rural Services teams are headed by Mike Butler (Yeovil), Ian Sharpe (Shepton Mallet), Andrew Vickery (Exeter) and Paul Neate (Devizes). Looking after over 1,200 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

Sponsored by Old Mill Rural Services and Frome Animal Products, the haltered cattle class attracted a spectacular entry of high quality stock, which were judged by Rob Rattray. Claiming the championship and £1000 prize money was Michael Kingston’s 18-month old Limousin cross heifer, Chequita. “I am thrilled to present this prestigious prize to Mr Kingston, from Catcott, Somerset, at what has been a superb first Winter Fair,” said Old Mill’s Neil Cox.

“Sedgemoor Auction Centre is becoming one of the country’s leading livestock markets, and we are pleased to be supporting such an important lynchpin for the rural community. I am sure this event will become an annual highlight of the farming calendar.”

Chequita went on to sell for 370p/kg (£2147/head), with Mrs DA Williams’ 17-month old Limousin steer taking the reserve champion spot, and selling for 255p/kg (£1692/head).

“The final championship line up of nine class winners was as strong a show of cattle as will be seen anywhere in England this year,” said auctioneer Jeremy Bell. “Congratulations to all exhibitors for creating such a spectacular show of cattle and many thanks to our commercial vendors for bringing forward such a quality selection of cattle to follow.”

Caption: Neil Cox from Old Mill Rural Services (left) presents the £1000 prize to the Champion Haltered Animal at Sedgemoor Auction Centre’s South West Winter Fair.  He is pictured along with the winning animal, a Limousin Cross heifer called “Chequita”, owner Michael Kingston from Catcott and judge Rob Rattray (far right).

High resolution photograph (914KB)

Editor’s Notes

For more information contact:
Alan Stone, marketing manager – Tel: 01749 335007, or e-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services
Old Mill accountants and financial advisers employ 190 staff in four West Country offices. The Rural Services teams are headed by Mike Butler (Yeovil & Devizes) and supported by Ian Sharpe (Shepton Mallet), Andrew Vickery (Exeter) and Paul Neate (Devizes). Looking after over 1,200 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

Following a pair of court cases involving Mars and William Grant & Sons Distillers, HM Revenue & Customs has changed its stance over the treatment of depreciation for tax purposes within closing stock valuations.  Businesses are required to include depreciation within a closing stock valuation such that the cost of production is accurately reflected.  Although depreciation is not an allowable expense, HM Revenue & Customs would not allow an adjustment to reflect this. However there is now an opportunity to do so, and reduce taxable profits accordingly, says rural tax specialist Catherine Vickery.

“Most farmers and food businesses will be aware that lowering stock values reduces profits, and therefore cuts tax liabilities. Many have a significant amount of equipment, which is depreciating each year, and carry considerable stock levels. Offsetting a percentage of this depreciation against stock values can therefore have a massive influence on business profitability, particularly in the first year that the adjustment is made.”

For example, a typical arable farm carrying over a quarter of the year’s grain, can now offset 25% of its depreciation against the value of those stocks as part of its cost of production. That could cut the value of the stock by, say £25,000, which, at a marginal tax rate of 30%, would equate to a tax reduction of about £7,500, says Mrs Vickery.

“Businesses that carry larger stocks will be able to claim an even greater depreciation element. Some will be able to save vast amounts of tax – big farmhouse cheese producers, for example, could be looking at adjustments measuring in £100,000’s.”

All businesses should consider their stock valuation and depreciation calculation, with the help of their advisers, she adds. “HMRC is actively encouraging people to deal with this matter in the current financial year – those who have already finalised their position should look at it again with a view to obtaining a tax refund.

“This is a superb opportunity for anyone who relies on equipment as part of their business and carries stock or crops over at the end of their accounting year to slash their tax liability. It would be madness not to do so.”

For more information contact Catherine Vickery at Old Mill on 01935 426181.

Usually farm cottages occupied by farm employees qualify for 100% IHT relief, says Mike Butler, Head of Rural Services at accountant Old Mill. But from a tax perspective there is a huge difference between farm workers engaged through the PAYE system and those who are registered as self-employed.

“Some farmers may find it attractive to save on National Insurance and other expenses by using self-employed labourers. But if they provide accommodation for their workers, they must be aware of the impact such an arrangement could have on the taxation of farm cottages, potentially costing the business £100,000s.”

For example, a farm cottage worth £275,000, which is occupied by a farm employee, would qualify for 100% IHT relief. But if it housed a self-employed worker it would become liable to IHT charges of 40%, raising a tax bill of £110,000.

“When considering whether a property is subject to Inheritance Tax, one must at least look at its use and qualifying occupation periods for two years prior to the date of death,” says Mr Butler. “It is essential that farmers are aware of this potential pitfall, and plan now to avoid hefty tax liabilities in the future.”

It recently benchmarked South West dairy clients with a year end of March 2009, and found that average net profits rose by only 1%, excluding the Single Farm Payment, to £42,550 per herd. Even with the single payment included, net profit only increased by 3%, with a sharp increase in costs eroding better returns.

“Milk yields per cow actually fell by 4%, to 6,835 litres – probably on the back of poorer quality forage last winter,” said the firm’s Andrew Vickery. “However, this was more than compensated for by a rise in the average milk price, from 23.5p/litre in 2007/08 to 27.61p/litre in 2008/09, as well as a slight rise in herd size.”

Overall, the money generated by milk sales increased by an average of 13%, and non-milk turnover also grew, giving an average rise in income of 12%. “However, costs were also up, with feed prices soaring by 20% and contracting costs rising by 16%, which eroded farmers’ improved returns,” said Mr Vickery.

Looking ahead, the 2009/10 financial year could be considerably tighter. “The milk price has been weakening, oil-driven costs seem to be rising again, and despite the continuing low Bank of England base rates the cost of new borrowing has risen. On the positive side, forage quality should be better and the weaker sterling has ensured a higher yield from this year’s single payment.”

Farmers must budget carefully to accurately predict their financial performance before the end of the year, said Mr Vickery. “If the figures are not as good as last year, dairy producers could be in a position to show a loss and claim back some of the tax paid over the past two more profitable years. Early consultation with an accountant who understands farming issues is very much recommended.”

Steve and Heather Tucker of White Row Farm Shop, Beckington, Frome, joined more than 1000 people at the glittering awards dinner last week (8^th October), where they learnt of their success. Held at the Grosvenor House Hotel in London to celebrate the achievements of British farmers, the awards are the highlight of the food and farming year.

“We are absolutely delighted to have won this award – we are passionate about the food we produce and what we sell at White Row, and this has obviously come across to the judges,” said Mr Tucker. The couple set up the business on their pig farm in 2000, following a downturn in the pig industry. It now includes a farm shop, café, deli, butchery, fish counter and a garden shop. “We took a huge gamble, but we have gone from strength to strength and haven’t looked back.”

Crucially, throughout their expansion the Tuckers stuck to their original ethos of providing local, home-grown produce, as well as sourcing as much as possible from local producers. They are also keen to educate children about food and where it comes from, and are now supplying local schools with vegetables. “I’d like to open the farm up more to the public to show them what goes on, and to set up a commercial kitchen and cookery school where people can come and learn how to best use local produce,” said Mr Tucker.

Pearce Hughes of Asda, which sponsored the highly competitive category, said: “The Local Farmer of the Year is a great accolade and Steve and Heather Tucker are worthy winners. Their passion for growing fresh produce and their plans to educate local children can never be underestimated.”

The couple have enjoyed tremendous support from their loyal customer base, as well as their advisors and accountant Mike Butler at Old Mill Rural Services, who joined them at the awards ceremony. “I am thrilled that Steve and Heather have won this award, recognising the hard work and dedication that they both put into the business,” he said. “They have transformed it from a struggling pig unit to a thriving shop and café, attracting more than 3000 visitors a week.

“By staying true to their roots with local, fresh, home-grown food, they have ensured the success of their business, which is bucking the economic trend with growth of 20% this year, and provides employment for 45 local people. Their pride and passion is a real inspiration, and I am delighted to have played a small part in helping these true ambassadors for local food.”

To learn more about White Row Farm Shop see www.whiterowcountryfoods.co.uk or visit the farm, located just off the A361 near Beckington, Frome.

For more information, call Heather or Steve Tucker on 01373 830798.

Although many traditional buildings are an integral part of the farmstead, a number have fallen into disuse due to inability to house modern farm machinery or livestock. HM Revenue & Customs has started to hone in on this area, questioning whether such buildings should qualify for Agricultural Property Relief from Inheritance Tax.

“This is a serious and worrying trend, potentially rendering many thousands of farmsteads liable to a heavy tax burden,” says Mike Butler, partner at Old Mill Rural Services. “Buildings which HMRC perceives as not being in true agricultural use no longer qualify for 100% tax relief, which could give rise to a large tax bill.”

The key question is whether the buildings were occupied by farming in the two years prior to the owner’s death, says Mr Butler. “If they were either unoccupied, or merely used to store sundry bits and bobs, there is very little argument to defend an Agricultural Property Relief claim.”

Importantly, many traditional farm buildings carry an inherently high value, due to the possibility of conversion into residential dwellings or commercial units. They therefore form an extremely valuable part of many deceased farmers’ estates. Although Agricultural Property Relief only covers the agricultural value of the building, any excess can be covered by Business Property Relief, as long as the building is used in the farmer’s own business.

To avoid being saddled with a large Inheritance Tax bill, farmers should ensure the buildings are in constant agricultural use, and retain proof of this. “Keep photographic evidence of how the buildings are used; ensure they are noted on insurance documents as being used as part of the farming business; and where they are used to store chemicals or fertiliser, make sure the appropriate certification is given for that building,” says Mr Butler.

Maintaining or renovating old farm buildings is also a useful tip. “Well maintained buildings provide persuasive evidence that you want to keep them in serviceable agricultural use. By showing the repairs through the farm accounts, you clearly demonstrate that the building is still important to the farming operation. Doing so does not only provide full tax relief on any work done, it could secure 100% Agricultural and Business Property Relief in the future – a valuable saving for any farming business.”

The Wilson family have enjoyed considerable showing success with both their Holstein and Jersey herds this year, and scooped the coveted Cattle Presentation Award with their Jersey cow, Bluegrass Heritages Lady.

“I am delighted to present this award to Hefin and his son Ifan, who takes such an interest in the farm,” said Ian Sharpe, partner at Old Mill’s Shepton Mallet office. “This is a real family affair, with three generations involved in the dairy enterprise at Tregibby Farm, Cardigan, Dyfed. It is always heartening to see people who take such pride in their work, and who display such wonderful animals for the general public to appreciate.”

The Wilson family also won the prestigious Supreme Championship at the Show with another Jersey cow, Bluegrass Jazzman Panama – the first Jersey ever to claim the award.

The Royal Bath & West of England Society was elated with another record attendance of more than 6200 visitors, with the Show continuing to grow steadily year-on-year. With major investment in the pipeline, the showground, near Shepton Mallet, Somerset, is set to become the country’s first energy self-sufficient showground.

“With cereal prices in freefall and many other commodities following suite, a lot of farmers are potentially operating at a significant loss this year,” says Partner Mike Butler. “Even though they benefited from improved profits last year, many will be worried about the financial outlook over the next 12 to 18 months.”

Poor summer weather has compounded lower commodity prices, with many farmers suffering from low cereal yields and unwelcome drying costs, particularly in the West Country, he adds. “The strengthening Pound and firming oil prices are also adding to the uncertain economic outlook.”

Farmers must always be able to react quickly to volatile market conditions – and part of that must be in the management of their tax affairs, says Mr Butler. “Over the past couple of years we have concentrated on minimising tax on what were, for many, relatively strong profits. But now farmers’ focus must be on recovering tax and maximising cash flow during this difficult trading period.”

Historically, farmers could only recover tax paid in the immediate previous year – but recent concessions mean they can recover tax paid up to three years prior to a loss-making year, he adds. In addition, they can make use of the usual tools to mitigate tax, such as farmers’ averaging; 100% tax relief on equipment expenditure up to £50,000 per annum; and pensions relief. 

“It is also important to operate the correct year end. It is possible to accelerate the reporting of more difficult trading conditions, to reduce the delay until tax refunds can be obtained.” Other options include changing the timing of commodity sales, and reducing tax payments on account.

“Old Mill is already seeing tax savings of more than £30,000 per farming business – or typically £7000- £8000 per partner,” says Mr Butler. “Farm businesses, particularly those which have paid significant amounts of tax in the previous three years, should be looking at their options now. It may be possible to recover some of that tax, reduce future payments on account, and minimise the overall tax burden by careful planning during the remainder of the financial year.

“Farmers and rural businesses should also seek to maximise support in the form of tax credits, which can be a vital lifeline for families during low income periods. With cash flows becoming tight, and many businesses likely to be operating at a loss, it is imperative that farmers plan their fiscal affairs in the most beneficial way possible.”

Many farmers have diversified into contracting or other ancillary businesses, and do not realise that doing so could jeopardise Inheritance Tax relief on their farmhouse and other assets, says Catherine Vickery, rural tax consultant at Old Mill.

“Often diversifying out of the main farming enterprise is a gradual process, particularly in the case of agricultural contractors, who don’t realise that they are no longer farming from a taxation point of view.”

Contractors who are no longer farming their land in-hand stand to lose Agricultural Property Relief (APR) on the farmhouse, leaving it open to 40% Inheritance Tax on anything over £325,000.

Where businesses have been trading for two years or more, they will benefit from 100% Business Property Relief (BPR) on their buildings, machinery, and other assets, explains Mrs Vickery. “However, this does not include the farmhouse, and there is an additional problem where assets are owned by an individual but used by a partnership or company.”

In these cases, the individual must have a controlling interest in the partnership or company – or the assets will not qualify for any BPR. Even where they do have a controlling interest, the assets only qualify for 50% BPR, leaving the remainder open to taxation at 40%.

“This is very common with land and buildings, as we frequently see contractors trading as partnerships or companies, using premises owned by one of the individuals. As a result only 50% BPR is available, and beneficiaries will be levied with a hefty, and unnecessary, tax bill.”

Fortunately, land and buildings which are rented out to another farmer will still qualify for APR. But where property has a hope value, perhaps due to development potential, the extra worth will not be eligible for relief. “In these cases it might be better to use those buildings in the contracting business and obtain full BPR instead,” says Mrs Vickery.

Tenant farmers should be particularly careful when diversifying, as they could breach the conditions of their tenancy and endanger their landlord’s tax position, she adds.

“In all cases it is extremely important to consider how your estate is structured, to take maximum advantage from Agricultural and Business Property Reliefs. Where these reliefs are not available, a little careful planning can go a long way to reducing potential liabilities in the future.”

“Traditionally, agriculture has fared better during economic downturns than other sectors,” says Partner Ian Sharpe. “Although some farmers may find it difficult to secure credit, the industry as a whole looks set to ride out the economic storm. Many farming businesses are backed by property assets, and despite the drop in house prices, the market for land and farms remains strong.”

Naturally, there are threats – most farms now rely on some form of diversification, which may be more likely to be affected by the downturn, he adds. “Anyone with holiday cottages could face an uncertain year – but with more people holidaying in the UK, farm tourism and accommodation could actually stand to benefit.”

Farm shops could potentially suffer from decreased spending on food and drink, although demand for local produce remains strong, says Mr Sharpe.

The most vulnerable sector is likely to be industrial units and office lets. “The number of businesses going into administration has soared, so landlords must be aware of potential problems with their tenants. Not only could they be left with rent owing, they may struggle to rent out units after they have been vacated.” Landlords left with empty commercial properties will also be liable for full business rates, so should take advice on how to keep such expenses to a minimum, he adds.

The first step to recession-proof a business, and even take advantage of the new economic climate, is to assess cash flow requirements, says Mr Sharpe. “Most businesses do not fail due to a lack of profits, but because they run out of cash. Prepare a budget and if you are likely to need more borrowings, give your bank as much warning as possible.”

Farmers should also keep on top of money owing and chase up debtors regularly, he adds. “In addition, stay up to date on your own payments, so that you do not suffer unnecessary interest or late payment charges.”

With the Bank of England base rate falling to 0.5%, the cost of borrowing has dropped sharply, making now a good time to invest for the future. “Many builders and contractors are struggling to secure work, so farmers have the perfect opportunity to carry out repairs at competitive rates,” says Mr Sharpe. “Now may also be a good time to consider fixing loans at current interest rates, to reduce risk in these volatile markets.”

The weaker Pound against the Euro is also hugely beneficial, boosting the value of the single farm payment by around 20%. “It is possible to lock into this favourable exchange rate by taking out a Euro loan from your bank. This not only removes the risk of future currency fluctuation, it could significantly boost farm incomes,” he adds.

“While no sector is entirely sheltered from the economic downturn, farmers who protect against risks and take advantage of opportunities are most likely to weather the storm and strengthen their business for the future.”

Old Mill’s Martin Taylor presents 1st prize to Thomas Hunt (left) and Michael Berside (right) for Thomas Hunt’s  pair of Exmoor Horns. Thomas and Michael are both ‘A’ level students from Bideford in North Devon. Thomas has 30 Exmoor Horn ewes and was delighted to pick up a 1st prize at this, his first ever show.

Neil Cox presents 1st prize to Leslie Cook (right), from Over in Cambridgeshire, for his winning Hereford steer, with his daughter Frances (left) holding her father’s 2nd prize steer.

Julia Banwell presents the winning rosette to Henry Dart (right) and his son Christopher (left), from South Molton in Devon, for their pair of Exmoor Horn wether lambs.

Although R&D is not an immediately obvious expense for farmers, those investing in specialist breeding programmes or developing particular technologies for use on the farm could qualify for the tax relief, says accountant Old Mill Rural Services.

“Tax breaks for this type of investment have been around for a number of years, but many businesses have been deterred from making an claim as they feel that they need to be involved in very high-tech work – this simply is not the case,” says corporate tax manager Isobel Savage.

In August, HMRC increased the tax relief from 150% to 175%, enabling small and medium-sized businesses to deduct 175% of qualifying R&D expenditure against profits.

Businesses must spend at least £10,000 per annum to qualify, but this can include a wide variety of related costs, including employee salaries, overheads such as heat and light, materials costs and even an element of costs from subcontractors, she adds.

“The R&D work must be relevant to the business and there needs to be an intention to exploit the benefits from this commercially.” The work should involve developing scientific or technological knowledge that isn’t commonly available, to improve a product, process or service.

“In related businesses such as agricultural engineering or added-value food production the opportunities are far clearer,” says Mrs Savage. “While many businesses may already be making claims, the increase in the tax allowance should lead all businesses engaged in these sectors to consider their options carefully.”

A business with qualifying expenditure of £12,000 a year could now claim a deduction for tax purposes of £21,000. For a higher rate taxpayer that would reduce the tax payable by £3,690, while for a small company paying tax at 21% it would save £1,890.

“R&D is an essential part of many agricultural businesses, but hands-on farmers may not even be aware that they can claim these expenses back,” says Mrs Savage. “With the increase in the relief available, farmers and related industries could make considerable savings. And with the deadline for online tax returns looming, businesses should speak to their tax advisor and work out whether they are eligible to claim this valuable tax relief.”

Old Mill Managing Partner Jolyon Stonehouse comments, “We have been enjoying rapid organic growth, increasing both income and headcount by more than 10% each year since the management buy-out. However we now feel it is appropriate to enhance our business further by merging with LE Bull and Co. Their client base fits well with our own, and they share our philosophy of providing first class client service while being an outstanding place for staff to work. We are excited by the prospect of a Wiltshire office which will help us serve our considerable number of existing clients in the county and provide a base to further grow our business there.”

All members of the staff of L E Bull and Co will be taken on by Old Mill and there are expansion plans for the office as Old Mill introduce their full range of client services.

Paul Neate senior partner of Bull and Co observes “The synergies between the two companies are excellent. We specialise in looking after farming clients and the Old Mill rural services teams are already the leading supplier of accounting services to West Country agriculture.  Our existing clients will be able to benefit from the specialist tax and financial services advice that is part of the Old Mill package. .”

Paul will become a partner in the Old Mill Rural Services team and John Smith, his fellow L E Bull and Co partner, will become the Senior Manager in the Rural Service team.

Old Mill already operates from offices in Shepton Mallet and Yeovil and earlier this year launched a full service offering office in Exeter.

Rural accountant Old Mill has brought together a range of industry experts to offer farmers the best information and advice at an important evening meeting on 11 November.

“Planning has always been an important part of successful farming enterprises,” says Andrew Vickery, Manager of the Old Mill Rural Services team in Exeter. “But in such uncertain times it is even more essential, so that you can protect against unforeseen difficulties and capitalise on opportunities as they arise.” Speakers at the meeting, entitled Farming Today, and Tomorrow, will examine the state of the industry today and identify areas of potential opportunity, as well as possible pitfalls, over the coming months and years. Kicking off will be Euryn Jones, Barclays’ National Agricultural Specialist, who will share his thoughts on how farmers can plan their future in an unpredictable world. John Warrington, Farm Consultant with Promar International, will examine Promar’s latest dairy farm performance data, so delegates can see how their own farm results compare and pinpoint areas to increase profitability. Finally, Andrew Vickery will identify a number of both current and longer-term tax issues facing farmers. “These can have a significant impact on cash flow, your bottom line and longer term succession plans,” he says. “By bringing together this cross-section of industry specialists and encouraging discussion among all of our delegates, we hope to give farmers a clearer picture of where their business is heading, and offer them the tools to make the most of whatever the future might hold.” The meeting will be held at Padbrook Park Golf Club, Cullompton, Devon, on 11 November at 7.00 for 7.30pm, followed by a hot supper. To book your place, or discuss individual tax planning issues, call Old Mill Rural Services on 01749 335007. Journalists are welcome to attend.

Businesses with finance scattered across a number of different providers could save money by consolidating their borrowing into one loan or mortgage, he explains. “Despite the credit crunch agricultural banks are still very much open for business and there are still some good deals out there.”

Improved profits in some agricultural sectors could either be used to reduce debt or reinvest in the business, and farmers releasing larger capital sums could make wise use of changes in the tax regime, he adds.

“Anyone with non-business assets like buy-to-let properties or quoted shares could benefit from recent changes to CGT, which have reduced tax on non-business capital gains from up to 40% to a maximum of 18%.”

For example, a rental property purchased five years ago which now stands a capital gain of £150,000, owned jointly by a husband and wife paying the higher tax rate, could be disposed of with a tax liability of £27,000 compared to up to £54,000 under the old regime. “Now could now be the ideal time to release funds from such investments to repay business borrowing or fund new projects,” says Mr Vickery.

New investments, such as expanding a dairy enterprise or building a new grain store, should always be carefully considered from both a financial and a tax perspective. “The phasing out of Agricultural Buildings Allowances will play an important part in your calculations, but there are other new tax reliefs, including changes to Capital Allowances, which could be particularly beneficial,” he adds.

“Whatever your situation, it is worth speaking to your bank manager and scouring the market to get the right finance package to suit your business. If you are considering making new investment decisions or disposals take professional advice – this could be the right time to make changes for the better.”

For more information contact:

Alan Stone, marketing manager – Tel: 01749 335007, or e-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services

Old Mill accountants and financial advisers employ 160 staff in three West Country offices. The Rural Services teams are headed by Partners Mike Butler (Yeovil) and Ian Sharpe (Shepton Mallet). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

Mr Hill, who enjoyed considerable success in the showing classes with his Quaish herd of Limousin cattle, won the award for best presentation of cattle in the lines.

Ian Sharpe, partner at Old Mill’s Shepton Mallet office, said he was delighted to continue the firm’s tradition of sponsoring the Cattle Presentation Award. “We think it is important that the cattle in the lines are made accessible and are well presented to the public,” he said.

“Many people come to the Bath & West Show to look at the wonderful animals which are on display, and it’s important to maintain that link between farming and the general public.

“Nick Hill presented his Limousins beautifully, with great care and attention to detail, and it is with great pleasure that I present him with this award.”

Old Mill Rural Services was also asked to present the Nelson Burden Award for outstanding contribution to the Show’s beef cattle section. This year it was won by Geoffrey and Doreen Fuller from Minehead, Somerset.

Ian Sharpe & Nick Hill – High resolution photograph (803KB)

Nelson Burden Award – High resolution photograph (787KB)

For more information contact:

Alan Stone, marketing manager – Tel: 01749 335007, or e-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services

Old Mill accountants and financial advisers employ 160 staff in three West Country offices. The Rural Services teams are headed by Mike Butler (Yeovil), Ian Sharpe (Shepton Mallet) and Andrew Vickery (Exeter). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

With climate change a hot political topic, the opportunities for everyone to do their bit are growing fast – and can have a dramatic impact on both the environment and the pocket, says accountant Old Mill.

It is supporting the Eco-Gym at this year’s Royal Bath & West Show, in a bid to show people how easy it can be to become eco-friendly. Visitors to the Show will be able to burn off a few calories while making a delicious smoothie on a special blender bike, or use their own muscles to generate electricity for Scalextric and toy train races.

“This is an area where people can visualise energy,” says John Jackson, partner at Old Mill. “They can find out just how hard it is to keep one light bulb on, or run a TV, or even boil a kettle. They can lift the weight of their own carbon footprint and by using their own energy see the size of the problem facing the planet.”

The Eco-Gym is part of the Show’s Eco-Zone, a fascinating area where visitors can learn all about environmentally-friendly technology, from renewable fuels and solar energy to green packaging and anaerobic digestion.

Experts will also be on hand to offer one-to-one advice on becoming more energy efficient, and trade stands abound in commercial options available to farmers, individuals and other businesses.

“The Eco-Zone is a small but essential step in the long road to public acceptance of the need for change, and a precursor to more ambitious intentions for the showground,” says Archie Montgomery, who farms in North Cadbury, Somerset, and helped to create the Eco-Gym. “For some years it has been obvious that Britain, with its historical abundance of coal, oil and gas, has taken a very different view of national energy security compared to its European neighbours.”

Continental countries with poor fossil fuel resources have successfully developed renewable alternatives, many of which rely on farmers and the land-based industries to provide the raw materials – including wood, crop-based biofuels or waste products.

“This has improved farmers’ livelihoods and income security and helped to create wealth in local communities,” says Mr Montgomery. “We have a lot to learn in this country, and the Bath & West Show is an ideal opportunity to publicise information about sustainability which is already household knowledge amongst our European neighbours, and in the process promote the market for the land-based renewable sector.”     

• For full details of the Show, which will be held from May 28-31, visit http://www.bathandwest.com/ or ring the Bath & West Showground on 01749 822200.

• Staff from Old Mill Rural Services will be available to discuss the benefits of adopting environmentally-friendly practices, as well as any financial and tax-related issues, at the Old Mill stand in the Showering Pavilion.

For more information contact:
Alan Stone, marketing manager – Tel: 01749 335007, or e-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services
Old Mill accountants and financial advisers employ 160 staff in three West Country offices. The Rural Services teams are headed by Mike Butler (Yeovil), Ian Sharpe (Shepton Mallet) and Andrew Vickery (Exeter). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

Faced with poor commodity prices over the past decade, many farmers have looked at ways to maximise profitability through exploiting non-core streams of income, says Ian Sharpe, partner at accountant Old Mill Rural Services.

“This is perhaps most evident in the family farm scenario where some family members now earn the bulk of their income from employment away from the farming business.”

In a sample of 150 of Old Mill’s farming clients, 56% have significant other enterprises outside of traditional farming activity, with the most common being income from property interests. “Some 37% of farms now have an element of property management, varying from residential lettings to bed and breakfast and office units,” says Mr Sharpe.

The next most popular form of alternative income is off-farm contracting, at 11%. Added value enterprises make up 3% of diversifications, with commercial shooting coming in at 2%.

“In addition, 15% of farms have one of a number of other diversification projects ranging from golf courses to horse livery and farm shops,” he adds. Many also have more than one diversification falling into the above categories.

“But it is important to note that these figures only relate to farm diversification, not to non-farming jobs undertaken by family members. Off-farm employment now forms a significant part of modern farming family life.”

The impact such diversification has on the bottom line ranges from a few thousand pounds to over a million -in some cases considerably overtaking the core farm activity, says Mr Sharpe.

“Some farmers can no longer be considered food producers – they are multi-skilled businessmen and women who have made best use of their resources to not only survive the hard times but thrive and grow their business as each year passes.”

Although many commodity prices are returning to profitable levels, Mr Sharpe expects a lot of farmers will continue to diversify. But it is important that they examine any major business change carefully, not least because of the practicalities of running a new venture alongside the core farming enterprises.

There are also important Capital Gains and Inheritance Tax implications, and advice in these, and other specialist areas, such as planning and employment, is crucial, he adds. “Careful preparation is essential to put a new business on a sound footing before trading commences, and to reduce the chance of unforeseen problems down the line.”

The new Enhanced Capital Allowances (ECA) offer energy saving or water conserving plant and equipment a 100% write off in its first year, says accountant Old Mill Rural Services. “This could be a major boost for anyone considering putting in new dairy infrastructure to meet tighter regulations under Nitrate Vulnerable Zone proposals, for example,” says Mike Butler, director of rural services.

Eligible water conserving options include water efficient taps, showers and toilets, slurry separators, meters, and rainwater harvesting equipment. Energy saving lighting, refrigeration equipment, boilers and compressors also qualify for the new allowance.

“With improved profits in arable and dairy sectors, as well as tightening environmental legislation, many farmers are planning significant reinvestment in their business over the coming years,” says Mr Butler. “This new allowance could provide them with a major tax saving for adopting environmentally-friendly practices. Not only will they have lower tax bills, they will enjoy lower utility bills as well.”

Many dairy farmers are considering installing rainwater harvesting technology on new buildings, and it is possible that a significant proportion of the building itself will qualify for the 100% first-year allowance.

Currently, agricultural buildings qualify for a 4% annual allowance, but this is being phased out from April. Capital allowances on plant and equipment will offer a 100% write in the first year from April, up to a maximum of £50,000, followed by a 20% annual write-off thereafter. “This is great news for anyone buying new plant and equipment,” says Mr Butler.

“But someone buying a new tractor can quickly reach the £50,000 limit. Fortunately, the ECA will run alongside the normal Capital Allowance regime, and is not capped, so farmers buying a new tractor and investing in environmentally-friendly equipment will benefit from full relief on both purchases.”

This is particularly welcome, given the significant increase in farmers’ likely tax liabilities due to higher farm profits and the phase-out of Agricultural Building Allowances, says Mr Butler.

Anyone looking to erect a tax-efficient agricultural building and reduce their income tax bill should consider using a Self-Invested Personal Pension (SIPP), he adds.

“Take, for example, a farming partnership with £120,000 profit this year, which wants to erect a £120,000 new building. By paying £60,000 into a SIPP before April 5, and another £60,000 after April 6, the partnership will save £24,000 in tax for each tax year. They can then invest that money into the new building, getting 100% tax relief, and reducing the actual cost of the build to just £72,000.”

Fore more details on how to make the most of SIPPs or the new Enhanced Capital Allowances, contact Mike Butler on 01935 709301.

Ends.

Notes to editors

For more information contact
Alan Stone – Marketing Manager
Tel: 01749 335007
E-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services
Old Mill accountants and financial advisers employ 160 staff in three West Country offices. The Rural Services teams are headed by Partners Mike Butler (Yeovil) and Ian Sharpe (Shepton Mallet). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

Chancellor Alistair Darling today announced a new “Entrepreneur’s Relief”, providing a special tax rate of 10% on the sale of businesses, up a limit £1m. Capital gains over the £1m limit will be charged at the new CGT flat rate of 18%, due to be introduced in April.

“This new relief is worth £80,000 to an individual, if they use the full allowance over the course of their lifetime,” says Catherine Vickery, rural tax specialist at Old Mill’s Yeovil office. “But the problem is that it only applies to the sale of whole businesses or interests in a business.”

The relief will also apply to business assets, as long as they are sold complete with the business, but importantly it will not apply to individual business assets like fields or buildings, if they are sold in isolation.

“Under the current tax regime, farmers seeking to sell or gift business assets will qualify for Taper Relief and Indexation Allowance, reducing the tax rate to a maximum of 10%,” says Mrs Vickery. “But from April, these assets will be chargeable at the new rate of 18%, a massive hike in tax for rural businesses.”

Landowners letting out commercial units or farms will also not qualify for the relief, following a drastic tightening of business classification. “There are plenty of farmers out there who have been encouraged to diversify, who will now be penalised with an 80% increase in tax,” says Mrs Vickery. “Although some people are acclaiming Alistair Darling’s latest U-turn as a victory for small businesses, the reality is that only those who a selling up and getting out will benefit.”

Even those seeking to dispose of entire businesses should consider the loss of Indexation Allowance from April 6, as they may still be better off taking action before the new rules come in.

“There are ways to crystallise capital gains before April, to make the most of Taper Relief and Indexation Allowance,” says Mrs Vickery. “There may also be an opportunity for people to split up their existing business to allow for separate disposals in the coming years. However, as always, the devil is in the detail so it is essential to take professional advice and act now, before it is too late.”

Ends.

Notes to editors

For more information contact
Alan Stone – Marketing Manager
Tel: 01749 335007
E-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Accountants and Financial Advisers
Old Mill accountants and financial advisers employ 160 staff in three West Country offices. The rural services teams are headed by Partners Mike Butler (Yeovil) and Ian Sharpe (Shepton Mallet). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

At a business seminar in Devon last week land agent Carver Knowles and accountant Old Mill Rural Services joined forces to guide forward-thinking farmers through the threats and opportunities posed by current tax and planning legislation.

“Twelve months ago we were in a very different climate,” said Mark Neason, partner at Carver Knowles. Then, the majority of projects concentrated on developing redundant buildings for tourism or commercial use. “But within the past six months we have seen more people looking to put up new agricultural buildings.”

Stronger milk and grain prices, along with onerous slurry storage proposals, were contributing to this new wave of investment, but farmers had to consider potential future uses of buildings as well as immediate need, he warned. “It’s all about adding value to the farm and your business.”

Farmers should make the most of permitted agricultural planning rights, and seek to erect buildings on off-lying or un-serviced land. Not only would these buildings address immediate needs, they would add significant capital value to the land and offer potential development opportunities in the future, said Mr Neason.

And by improving the build specification and location of new agricultural buildings, farmers could open up commercial opportunities in future years, he added.

Accountant Neil Cox said there were many ways in which farmers could constructively utilise tax and pension opportunities when planning new buildings. These included the use of a corporate partner and a Self-Invested Pension Plan to minimise tax paid and reduce build costs through pension allowances – resulting in sizeable capital benefits.

“Agriculture is moving into a period where new developments are really on the cards,” he said. “By working with professionals farmers can benefit from a land agent’s ideas and experience to get the best from the planning authority, while using an accountant to exploit tax and pension regulations to make their project both viable and sustainable.”

Old Mill Rural Services is hosting a number of business seminars in partnership with Carver Knowles, covering topics such as tax efficient investment, proposed changes to the tax regime, obtaining planning permission and maximising capital value within a business. For more information or to book a place at Taunton or Yeovil on December 5, or Shepton Mallet on December 6, please call 01749 344986.

Ends.

Notes to editors

For more information contact
Alan Stone – Marketing Manager
Tel: 01749 335007
E-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services
Old Mill accountants and financial advisers employ 140 staff in three West Country offices. The Rural Services teams are headed by Partners Mike Butler (Yeovil) and Ian Sharpe (Shepton Mallet). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

For many, the highlight of the Statement was Mr Darling’s guarantee of the full use of the Inheritance Tax nil rate bands for both spouses, meaning a couple’s taxable assets of up to £600,000 will escape tax.

“However, this will actually have very little impact on the well-advised, as they would already have been achieving this through carefully drafted wills,” says Mike Butler, Partner with the specialist Rural Team.

More important to rural businesses are the planned changes to Capital Gains Tax (CGT) rules. These spell the end of Indexation, which gave an allowance for inflation between 1982 and 1998, and meant that if an asset had only increased in line with inflation then no CGT was payable. The benefit of this will be removed from April 2008.

Taper Relief is also to be abolished. Since 1998 Taper Relief has given a maximum tax rate of 10% upon the disposal of business assets, and even less in many cases. “Contrast this with the rate of tax suffered on the disposal of non-business assets of at least 24%,” says Mr Butler.

“With the planned introduction of a flat rate of CGT of 18% on the disposal of both business and non-business assets, it is clear who will be the winners and losers. Unfortunately those running businesses will be worst affected by the changes, which are due to be introduced next April,” he adds.

“Anyone seeking to gift or sell business assets should consider doing so before April 2008, to make the most of Indexation and Taper Relief benefits, and to avoid the increased CGT levy. This will particularly apply to disposals of old barns and farm land, especially if they have development potential.”

However, those looking to sell or gift non-business assets, including let properties and investments, should probably wait until after 6 April 2008 for maximum benefit.

Gordon Brown had already introduced other unpleasant surprises in his 2007 Budget, in the form of increases in the small companies’ Corporation Tax rate, from 19% to 22% by 2009, says Mr Butler.

“In the past, transferring a business to a limited company has proven extremely tax efficient, with lower tax rates on profits, and business asset Taper Relief from CGT on shares when winding up the business. The combination of modest rises in the small companies’ Corporation Tax rate and now the rise in CGT rates means that the decision to incorporate for fiscal savings is far less clear.”

Catherine Vickery, Old Mill’s Agricultural Tax Specialist, is working with the firm’s tax planning team to consider ways to utilise Indexation and Taper Relief before they disappear, adds Mr Butler. “But it is vital that anyone with assets sat at a gain considers their position, to make the most of this window of opportunity.”

Ends.

Notes to editors

For more information contact
Alan Stone – Marketing Manager
Tel: 01749 335007
E-mail: alan.stone@oldmillgroup.co.uk

About Old Mill Rural Services
Old Mill accountants and financial advisers employ 140 staff in three West Country offices. The rural services teams are headed by Partners Mike Butler (Yeovil) and Ian Sharpe (Shepton Mallet). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.

In recent years farmers have been able to write off 50% of the cost of machinery and plant in the first year, with a 25% allowance on the residue of equipment in succeeding years.

But from April 2008 the 50% allowance is likely be replaced with a 100% write off for qualifying plant and equipment purchases, up to £50,000. While this may sound attractive, any farmer spending more than £50,000 in any one year will not be able to claim any first year allowance whatsoever.

“What is worse, Gordon Brown has proposed to reduce the residual allowance from the 25% currently enjoyed to 20%,” says partner Mike Butler. “Furthermore, it is identified that fixed plant and equipment within buildings may not qualify for the normal capital allowances but will only attract a much lower 10% rate.

“Many farmers rely upon the claim for tax relief on plant and machinery to mitigate their tax liabilities,” he adds. “With increased mechanisation being used to compensate for lower labour levels, the recent run of first year allowances have made buying plant and machinery a relatively tax efficient option. But with the first year allowance now only available for the current year, this may be your last chance to enjoy those relatively useful tax breaks before they are taken away.”

At the same time, while the government is easing the Corporation Tax burden on large companies from 30% to 28%, it is racking it up from 19% to 22% for smaller businesses over the next two years.

This means that any companies with profits of up to £300,000 will not only be able to claim fewer tax allowance on purchases of plant and machinery, they will also be paying a higher rate of tax on their profits.

“While it may be cynical to suggest that only the largest businesses based in the City have the Chancellor’s ear, it seems clear that farmers and agricultural contractors are seeing their tax breaks being steadily eroded,” says Mr Butler. “And this all comes at a time when agricultural businesses desperately need to invest to prepare for a future with lower, decoupled, support payments.”

Ends.