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Farming

Farmers face hidden tax hike

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POTENTIAL changes to rules on Capital Gains Tax could lead to a tax hike for those inheriting farmland and assets, financial advisers at NFU Mutual have warned.

Many farmers can potentially pass on farms to their children free from Inheritance Tax due to Agricultural Property Relief and Business Property Relief.

As capital gains are wiped away on death, children inheriting can sell and only face Capital Gains Tax on any rise in value between the date of death and a sale.

However, in a review ordered by Chancellor Rishi Sunak, the Office of Tax Simplification has recommended that gains should no longer be wiped away on death where the estate has claimed Agricultural or Business Property relief to reduce Inheritance tax.

Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Many farmers choose to hold on to their farming assets until death on the basis that not only might they be free of Inheritance tax, but also escape Capital Gains Tax if sold shortly after death.

“The Office of Tax Simplification’s recommendation that gains should no longer be wiped on death where Agricultural or Business Property relief has been claimed to reduce inheritance tax will mean bigger tax bills for some farming families.

“The biggest impact will be on those who sell farming assets they’ve recently inherited. Those that retain the assets and continue to farm won’t face any immediate tax liability under the proposed changes.

“The Office of Tax Simplification also recommended a hike in Capital Gains Tax rates that would align them to Income Tax rates, leading to larger tax bills.

“However, it’s likely that any change would be accompanied by an allowance to take account of the rise in value caused by general inflation, so any tax is only levied on ‘real’ gains.

“It’s important to stress Rishi Sunak has not yet confirmed he will agree to these recommendations, but many farming families will be watching the March Budget with interest.”

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EXAMPLE

A farmer owns a farm worth £1m which he bought 25 years ago for £300,000. He dies and leaves it to his children, who sell for £1m shortly after his death. Under current rules, if he met the criteria for 100% Agricultural and Business Property relief, they would pay no inheritance tax on the £1m and no Capital Gains Tax on the sale.

Under the proposal to abolish the tax-free update on death, while there would still be no inheritance tax due – if the farmer’s children sold shortly after his death, they would face a Capital Gains Tax bill on the £700,000 gain. Based on the existing rate (20%) that would trigger a Capital Gains Tax bill of £140,000.

“It’s important to stress Rishi Sunak has not yet confirmed he will agree to these recommendations, but many farming families will be watching the March Budget with interest.”

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Farming

NSA Lambing List closes

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AS A much-valued service to its members, the National Sheep Association’s (NSA) Lambing List provides farmers with a place to advertise for much-needed lambing assistance from students and others seeking work experience each year.


The list annually provides an annual matchmaking service for around 400 farmers and veterinary and agriculture students. And despite a second lambing season under the constraints of Covid-19 restrictions the list has once again successfully helped farmers across the UK at this busy time of year.


The list has now closed and will reopen for advertisements for the 2021/2022 lambing season in the Autumn.
 NSA Communications Officer Katie James says: “The popularity of the NSA Lambing List grows each year.
“The guidance it provides to farmers using it and the links it offers students means it is incredibly valued by all parties involved. For most, the past two lambing seasons have taken place during Covid-19 restrictions meaning potential shortages of staff due to travel constraints or illness from the virus itself and additional measures to consider such as separate accommodation for temporary staff and social distancing.


“All at NSA are therefore pleased that the list has been able to help remove some of these concerns and provide a trusted method of securing extra help for its sheep farming members.”


 In a previous survey of NSA members using the list, more than 90% of respondents said they valued the list and would use it again to try and source additional lambing help from veterinary and agriculture students.


 Students who will be looking for work experience to assist their application to university or as part of ongoing veterinary studies are encouraged to consult the list from November 2021 when it becomes available once again to aid the student/farmer matchmaking.

NSA members will be able to add details of their available placements for their next lambing season from October.

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Farming

MPs urge level playing field

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IN its new report—Seafood and Meat Exports to the EU—the Environment, Food and Rural Affairs (EFRA) Committee expresses urgent concerns for exporters of highly time-sensitive fresh and live seafood and meat shipments to the EU, particularly small and medium-sized businesses.
Despite overcoming initial “teething problems” the new barriers small seafood and meat export businesses face could render them unviable, and factories and jobs may relocate to the EU.
The Committee’s report, therefore, calls on the Government to ease burdens, including:

• as a matter of priority, seeking agreement with the EU on digitising the certification of paperwork such as Export Health Certificates
• taking a flexible approach to the compensation fund for seafood exporters—including reconsidering the cap of £100,000 on individual payments, and providing similar support to meat exporters
• providing the same help to small meat and seafood businesses with the costs of extra red tape for exports to the EU as they can receive for moving goods to Northern Ireland
• establishing a ring-fenced fund to help create new distribution hubs, which allow smaller consignments to be grouped into a single lorry load, so reducing transport costs.

The Committee criticises the fact that controls on EU seafood and meat imports will not commence until 1 October 2021, with checks at the border only commencing from 1 January 2022.
This has placed British businesses at a competitive disadvantage and reduced the incentive on the European Commission to negotiate measures that would lessen the burdens facing British producers.
The report finds that adhering to the revised timetable will be ‘crucial’, to ensure food safety and to create a regulatory level playing field.
Neil Parish MP, Chair of the EFRA Select Committee, said: “British businesses have acted with incredible agility and perseverance to adapt to the new processes for exporting meat and seafood to the EU.
“With the many checks causing delays and costs, this hasn’t been easy. We are concerned that in the absence of equivalent checks for imports from the EU to Great Britain, there will be serious long-term repercussions for our producers.
“As it stands, the playing field is not even, and the Government must ensure that the new timetable to introduce import checks is adhered to.
“Even as “teething problems” are sorted, serious barriers remain for British exporters, and it is now imperative that the Government take steps to reduce these.
“It must be pragmatic in seeking an agreement with the EU to reduce the red tape that harms both sides, and in the meantime, crack on with giving practical support to small British businesses to sell their produce abroad.
“By the end of the year, the Government must have developed a digital system for certifying EHCs for imports from the EU, enabling it to then negotiate a reciprocal arrangement.”

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Farming

Cattle prices exceed averages – and expectations

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BEEF cattle prices in England and Wales have hit the milestone of £4 per kilo, making this average the highest on record in a number of years.

The average deadweight price for steers for the week ending 24 April was 401.4p per kg which is 83p higher than this time last year and 67p above the five-year average.

Market prices at present are being influenced by a number of unique factors, including strong UK domestic retail demand, a lack of supply due to stockpiling in late-2020 ahead of the Brexit deadline, and changes in trade patterns caused by both Brexit and the Covid pandemic.

Whilst the impact of these factors on demand for beef in 2021 is unpredictable, newly released data from the British Cattle Movement Service (BCMS) suggests that no radical shift is likely in the supply of animals over the coming months.

During 2020, total calf registrations in GB were up marginally (0.5%) on 2019. In Wales, the figures show an increase of 1.4% in beef calf registrations, whilst dairy calf numbers increased by 3.2% on the year. For 2021 so far, beef calf registrations are currently trending 1.1% below last year.

Glesni Phillips is a Data Analyst at Hybu Cig Cymru – Meat Promotion Wales (HCC). She said: “As we approach the peak calving period for spring calving herds in Wales, it is expected that BCMS monthly registration figures will increase over the coming months.

“However, the suckler cow herd in the UK has been retracting in recent years and currently, it shows no signs of re-building quickly. Prime heifer slaughterings during 2020 and the first quarter of this year, for instance, are higher than recent historic levels.

“These figures would suggest that supply onto the domestic UK market will likely remain tight for some time. Domestic retail figures for beef are strong, and with barbeque season coming up we should continue to see good demand  for good quality, locally produced beef.”

A more detailed analysis of the BCMS calf registrations data is available in HCC’s latest Market Bulletin on the HCC website.

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