Towards the end of last month the Chancellor George Osborne delivered his Autumn Statement to Parliament in which he outlined a number of changes that are likely to affect the agricultural sector in the months to come.
One such measure was the confirmation of the extension of farmers’ averaging from two to five years, which will be a huge relief for many in the agricultural sector. Under the new rules farmers will be given the choice between averaging over two or five years from April 2016.
This will allow farmers to roll forward previous profits and average them across the years, which in will allow them to fairly reduce their income tax bill, or potentially even claim a rebate for lost earnings in difficult years.
Many farmers will also welcome changes to the employment allowance, which reduces employer’s national insurance contributions on staff wages, which is set to increase from £2,000 to £3,000 in April 2016
However, in a twist to the rules the allowance will no longer be available to companies where the director is the sole employee and may also prevent the allowance being available for husband and wife companies, depending on the results of an upcoming consultation.
The Chancellor also announced that he would be slashing the he Department for Environment, Food and Rural Affairs (Defra) budget over the next few years, by up to £123 million. However, he did promise to maintain flood defence funding and spend £3 billion to safeguard England’s countryside through the Common Agricultural Policy.
The Chancellor also announced changes to the annual tax on enveloped dwellings (ATED), which is likely to affect a huge number of farming companies. The latest move is targeted at companies with an interest in residential properties – whether as an owner or a tenant.
ATED currently applies to residential properties worth more than £1m, but from April 2016 this will be reduced to just £500,000.
Reliefs, including where properties are occupied by employees – provided they don’t have an interest in the company – or where they are let to non-family members, will minimise the impact as will a farmhouse relief, providing the occupants work in the business for at least 20 hours a week.