Farmers are being asked for their views on plans for a significant tax change for the sector.
A government consultation was launched on 8 July, running until 7 September, which is seeking feedback on how best to implement new tax averaging plans for the industry.
From April 2016, the government plans to extend income tax averaging from two to five years. Environment Secretary Elizabeth Truss said: “Our plans around tax averaging will help our farmers better plan for the future and invest to further improve their competitiveness.
“We know it is important the tax system reflects the market realities that farmers face. Extended tax averaging will be particularly helpful for our world-leading dairy industry where we have seen recent global price volatility.”
The consultation sets out two options:
- option A is based on the two-year system. The current “volatility test” would be retained – that is, farmers may only qualify for averaging if the difference between profits in a good year and a bad year is at least 70 per cent – and farmers could decide each year if tax averaging would be beneficial to them
- option B would significantly reduce the current qualifying conditions and provide automatic averaging for a fixed period of five years. There would be no requirement for an annual claim but farmers would need to opt in for a full five years. There would be no volatility test.
Moore Thompson has extensive experience in working with agricultural clients and can provide expert advice on maximising tax efficiency. For further information on the new tax averaging arrangements or any aspect of business or personal taxation, please contact us.