“Farmers can perhaps look forward with more confidence than has been the case in recent years as prices, particularly for cereals, look brighter than they have been for some time.Â I hope that that optimism might translate in a more positive financial outlook and with proper tax and financial planning there is no reason why that should not be the case.
“It is possible that planning the financial side of the business could turn out to be one of the most profitable “crops” on the farm.”
Colin suggests the following areas for consideration:
Single Farm Payments: These are now being sold for between 3 and 3.5 times their annual payment value. While the subsidy regime is likely to survive in some form after 2012, it is unlikely that these values will continue in the coming years.Â If a farmer is thinking of selling their SFP this is a good time to do so.Â
If a person’s annual Capital Gains Tax allowance of £8,800 has not been used before 5 April 2007 it will be lost. However, it could be used to offset any gain made on the sale of SFP or indeed any other assets.Â In addition, SFP should qualify for full Business Asset Taper Relief, which in effect reduces the tax payable by 75%, so it is a good time to sell.
Inheritance Tax: It is always worth keeping Inheritance Tax planning in mind.Â Gifts of up to £3,000 can be made in each year, with carry back of one year, so if no gifts were made during the last tax year £6,000 can be gifted before 5 April 2007 and another £3,000 on 6 April 2007, which is an easy way of passing assets onto the next generation.Â
Making more substantial gifts of assets should also be considered as part of a programme of passing on the family farm.Â At the moment the agricultural and business property reliefs are very favourable and with proper planning it is often possible to pass over the whole farm without any Inheritance Tax being paid.Â It is possible that some of these reliefs could be changed after 6 April 2007.
IACS Forms: These need to be submitted by 15 May 2007 and many farmers may wish to consider electing to have their payments made in Euros.Â This can be an advantage as it avoids currency fluctuations if for example machinery or other inputs are being purchased in Europe or to repay borrowing on a Euro loan where interest rates are lower.
Notes to Editors:
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20th March 2007