The Budget and Farmers - June 2010
The emergency budget announced by the new Chancellor was a typically mixed bag for farmers, rural business and property owners containing both good and not so good news. Overall the emphasis was on cuts rather than tax hikes with DEFRA facing cuts of at least 25% to its departmental budget. With other departments including health and defence expected to be hit less hard than DEFRA, the likelihood is that cuts to DEFRA may exceed the minimum 25% threshold. Whilst this can be argued as necessary and a good thing, it remains in farmers' best interests for DEFRA and its agencies to meet its commitments on Single Farm Payment administration and environmental objectives.
For investors and business owners the widely forecast increase in Capital Gains Tax was more measured than expected. Rates will rise to 28% for higher rate tax payers and between 18% and 28% for basic rate payers. This change takes immediate effect however gains prior to the budget are to be treated differently. Entrepreneur's Relief has received a substantial boost with the first £2 million of qualifying gain being increased to £5 million and being taxed at 10 %.
Patrick Woodford, Rural Partner with Symonds & Sampson, said "The effects of the changes to CGT are difficult to predict. The rates are not as high as forecast and this may result in a release of land and property to the market which would certainly be well received by the pent up demand we have been experiencing. Land remains an attractive investment following this budget and for every successful purchaser there are several disappointed would-be buyers".
Other notable measures include a reduction in the Annual Investment Allowance from April 2012 from £100,000 to £25,000 which will impact significantly on machinery purchases and follows the last government's decision to remove the Agricultural Buildings Allowance from next year. For limited companies there is some good news with the main rate of Corporation Tax falling from 28% to 24% over 4 years and for small companies from 21% to 20% from next year.
Many farmers and rural property owners in this part of the world will be relieved that furnished holiday accommodation remains unscathed having been proposed for unhelpful changes by the last government. However the new government still intends to consult on future possible changes in this area.