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Farmers urged to get their tax plans in early
2:46pm Friday 9th August 2013 in Farming
ARABLE farmers have been urged to produce early financial information on this year’s harvest to allow scope for possible reductions in January 2014 tax payments.
Mike Harrison, a partner in Saffery Champness Landed Estates and Rural Business Group, said a combination of factors make tax planning this year even more essential for arable farmers.
He said tax wise, the final conclusion of the 2012 harvest would not be felt by some farmers until January 2014.
“Following on from that harvest, which could have been far worse if prices had not been strong, we have seen the weather impacting on autumn 2012 sowings, and a wet, cold 2013 spring,” he said.
“Fields of autumn-sown crops suffered waterlogging, and some have been ploughed up; others look thin following poor germination.
“What we predict is that the results for 2012/13 accounts are likely to produce a higher tax liability than for the following year.
“This will impact on farmers who are sole traders or partnerships through the tax payment on-account system.”
Mr Harrison said that on January 31, 2014, the self-assessed taxpayer will make their first payment on account for tax year 2013/14.
It will be based on their previous year’s tax liability which, he suggested, may be higher than that for the previous year.
He said: “This is likely to be exacerbated by the fact that the payment is likely to be made from depleted cash resources as all indications are that the 2013 harvest may not be good.”
Saffery Champness says one way of mitigating against that is to produce financial information following this year’s harvest early so that it may be possible, on the basis of those figures, to reduce the January 2014 tax payment, or to make an “average” claim spreading tax payments between two tax years.
Mr Harrison said: “Rural businesses may also wish to consider other factors such as whether their repairs bill for the current tax year is significantly greater than that of the previous year, and whether there are other sources of relief such as the enhanced allowances for new plant and machinery as these items will have an impact on the taxpayeris liability to income tax.”
It should be borne in mind however that the whole of the taxpayer’s income needs to be considered for a reduction in tax payments to be applied for not just a single income source.
So if harvest results are down, but rents are up, then there may not be sufficient reason to claim for a reduction in payments on account.
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