Nothing very obvious grabs the rural headlines in today’s budget other than the extension of CGT rollover relief to the new Basic Farm Payments. This measure is backdated to 20 December 2013, the date the new payment entitlements were introduced.
The single most significant measure for most rural businesses will be the increase and extension of the Annual Investment Allowance. Currently £250,000 a year this was due to revert to its former rate of £25,000 after December. In a very welcome extension it is to be increased to £500,000 almost immediately (from April), and to be extended to 31 December 2015. Complications which arise from straddling account year ends aside, this is most welcome for any farmer with serious investment plans in the next year or two. The government reckons this will ‘cost’ £85 million in 2014-15 rising to £1,270 million in 2016/17. However there will be a benefit to government from 2017-18 of £445 million over two years as annual writing down allowances are proportionately reduced.
The property world will also be interested in the extension of the special taxes which now apply to dwellings owned by ‘non-natural persons’ – generally meaning valuable London property held by companies, latterly to avoid SDLT on sales and transfers. The threshold for 15% SDLT is reduced to £500,000 from £2 million immediately – although there are savings for those unfortunates who have exchanged contracts but not yet completed. The threshold for ‘ATED’ – Annual Tax on Enveloped Dwellings – will also start to fall from 2015, to £1 million in the first year incurring an annual ATED charge of £7,000 and the following year to £500,000, leading to an annual ATED charge of £3,500.
Environmentalists will want to study the changes to the Carbon Price Floor. The Carbon Price Support rate has been reduced to £18/tonne through to 2020. It had been planned to raise it to £30 per tonne in 2009 prices by then. However the EU Energy Trading Scheme has not worked well, and continuation at the current floor rate was seen as a threat to the competitiveness of the electricity generating industry. This should take some pressure off electricity bills in the next few years (although marginally so in most cases).
Other more detailed points which may be relevant in the rural economy and to property include:
- Personal allowances for Income Tax go up to £10,000 this year, and £10,500 next year;
- A Social Investment Tax Relief is introduced this April. This will provide Income Tax and CGT Reliefs, with Income Tax Relief of up to 30% of the investment. Details are to follow, but this might be relevant to the various social enterprises which work in the countryside;
- Mineral extraction allowances for Income Tax purposes will now include the cost of a successful planning application (previously these were regarded as part of the cost of acquisition so the effect is to accelerate tax relief on the expenditure);
- Enhanced Capital Allowances in Enterprise Zones (100% allowances) are extended until 31 March 2020;
- Business Premises Renovation Allowance has been clarified, with time limits of 36 months for carrying out the work in some instances;
- The Seed Enterprise Investment Scheme is to be made permanent, including the associated CGT Reinvestment Relief;
- Landfill Tax rises in line with RPI, as does Climate Change Levy and Vehicle Excise Duty. However, the fuel duty rise planned for September has been cancelled;
- A ‘rolling’ age limit of 40 years for classic vehicle exemption from Vehicle Excise Duty takes effect in 2015 – handy for the rural poor who have to keep ancient cars on the road. The classic car business is said to be worth £4 billion a year and to employ 28,000 people;
- The Threshold for compulsory VAT registration rises to £81,000 from £79,000. This is also therefore the threshold for simplified three line tax accounting for smaller businesses, and from April businesses within this threshold will be able to account for tax on the cash rather than the accruals basis. Detailed points, but given the preponderance of very small businesses in the countryside these are all worth a look;
- At the other end of the rural scale, more is promised on trusts. Watch out for Nil Rate Band splitting where a settlor has created more than one trust, and some changes to simplify their Income Tax treatment. These are likely to arrive in the Finance Act 2015;
- Employee benefits and expenses may also see their treatment changed next year;
- Sticking with rural self-employment, Class 2 weekly National Insurance payments may in future be collected with the annual tax return;
- VAT on prompt payment discounts is also to be brought in line with EU requirements. The current treatment is that VAT is charged on the discounted price whether the discount is taken or not. In future, VAT will be levied on the actual consideration paid;
- Whether the exemption of satellites from Insurance Premium Tax will lead to lower prices for rural web surfers who access the internet by satellite remains to be seen …
- An interesting extension to an IHT exemption will see the estates of emergency personnel who die in the line of duty, or whose death is hastened by injuries incurred in the line of duty, exempted from IHT. This is in line with the treatment of armed services personnel, but won’t take effect until 2015. This seems a very laudable measure – but what of others who die in the line of duty, or perhaps performing individual acts of heroism on nothing other than humanitarian grounds?
- Another area worth scrutiny for those considering charitable land trusts as a means to protect a rural estate is the proposal to remove tax benefits from charities established for tax avoidance. Details are sparse, but there are several important estates who will need to follow this one closely;
- Managing partners of professional firms will also want to look at the proposals to introduce PAYE on salaried partners, and some of the anti-avoidance proposals where partnerships are a mix of individuals and companies (including ‘personal’ companies). Meanwhile it looks as if partners (and anybody else) who works beyond the age of 75 will in future be able to continue to claim tax relief on their pension contributions;
- The headlines over the next few days will be dominated by the pension changes. Given the greater freedom of pensioners to use their pension funds how they wish once they have secured a (lower) annual guaranteed income of £12,000 it will be interesting to see what impact this has in the property market. A rush to invest in buy-to-let perhaps?
- And finally some good news for the traditional rural boozer: beer down a penny and spirits frozen. His sophisticated counterpart is however going to be paying 6p more for a bottle of wine.
As ever, few headlines; lots of detail; a few opportunities and a few more pitfalls.