Budget 2017: Rural Round Up

No discernible direct rural points in today’s Budget, but nevertheless there is plenty to think about with the rural implications of the general measures.  In no particular order:

  • The rating announcements are welcome.  A small life belt for the remaining rural pubs with the news that any pub with a rateable value of less than £100,000 will benefit from a £1,000 discount.  Meanwhile businesses which have lost rate relief as a result of the revaluation will see their new rates bill capped at no more than £50 per month.  This is still a notable extra £600 per year which is still likely to be felt in the smallest of businesses to lose relief.  There is also to be a hardship fund of £300 million.
  • The rural self-employed will want to look at the changes to National Insurance contributions which arrive in April 2018.  Class 2 contributions – the weekly ‘stamp’ as it was once known – will be abolished; but Class 4 contributions (based on profits) will go up from 9% to 10%, with a further rise to 11% in April 2019.  Except at the smallest level this will lead to a rise in NICs for most self-employed men and women.
  • Rural skills may benefit from the introduction of T Levels, which will be a new form of technical qualification sitting alongside A Levels (and apprenticeships and .. and ..)
  • The introduction of Digital Tax continues but a small olive branch is the delay in its application to smaller businesses.  At least this gives  a breathing space for smaller rural businesses but will broadband arrive at the far end of the valley in time for online digital tax recording in April 2019?  Perhaps the commitment to spend £16 million on 5G may help, along with the £200 million committed to local broadband.
  • Meanwhile April 2018 becomes the deadline for digital tax for businesses which have profits chargeable to Income Tax, pay Class 4 NI contributions and have a turnover above the VAT threshold – so that’s most farms.
  • April 2019 is the deadline for Income Tax/NI payers who are below the VAT threshold.  It’s also the deadline for any body registered for and paying VAT.
  • April 2020 is the deadline for payers of Corporation Tax (unless presumably already caught by the April 2019 deadline for other VAT payers).
  • Businesses, self-employed and landlords are exempt if turnover is less than £10,000.  Employees with secondary income of more than £10,000 a year from self-employment or property are also caught by the new digital provisions.
  • Digital Tax will therefore be wide ranging and pervasive in its impact, especially for businesses which have maintained traditional records of their income and expenditure.  Preparations will have to be made.
  • Various plans to invest in electric vehicles, robotics and artificial intelligence (£500 million) should feed through to benefits for the agricultural industry, and £300 million to support 1,000 new PhD students in science, technology and engineering subjects may also have agricultural and rural benefits.
  • We are promised various consultations in the year ahead.  The key ones to look out for seem to be:
    • Rent a Room Relief – probably aimed at excluding the AirBnB’ers but could have unintended consequences for those who provide board and lodging for workers for example.
    • Employer provided accommodation – HMRC has undertaken research on this topic recently.
    • Landfill Tax – extending the scope to illegal disposals (not before time but the challenge will be to apprehend the miscreants).
    • Digital Tax Administration (yes, more)
  • We are also promised future calls for evidence in the following areas:
    • Employee business expenses
    • Taxation of benefits in kind
    • Red Diesel – this seems to be aimed more at the use of red diesel in various urban situations, but again beware unintended consequences of anything which might subsequently emerge
  • Insurance Premium  Tax is to rise by another 2% from June 2017.  As any renewal quotation shows this tax is now a significant additional cost.
  • The scope of ‘cash accounting’ for smaller businesses is to be increased, to an ‘entry threshold’ turnover of up to £150,000.  Once in it will be possible to stick with cash accounting up to £300,000.  This could be a useful simplification for some rural businesses, and the government has promised to provide a simple list of disallowed expenditure under the cash basis in this year’s Finance Bill.
  • Unincorporated property businesses will generally be allowed to calculate their taxable profits on a cash basis as well.
  • Meanwhile the tax free allowance for the first £5,000 of dividend income is to be reduced to £2,000.  This allowance is only a year old.  The figures probably equate to tax free dividend income from a shareholding of about £100,000 and £40,000 respectively (that’s assuming a portfolio which is paying 5% net in dividends – many will be much lower).
  • The domicile rules for Inheritance Tax change from this year.  ‘Non doms’ will nevertheless be deemed to be domiciled in the UK for tax purposes where they have been a UK resident for 15 of the past 20 tax years.  Worth looking at for the more international among us.
  • The sweet toothed will pay more for their sugary drinks from April 2018.  A lower rate of 18 ppl will apply to sugary drinks of 5 to 8 g of sugar per 100 ml, and 24ppl above this.  Less demand for sugar?  One for the sugar beet growers?
  • The Aggregates Levy remains frozen at £2/tonne, a rate set in 2009.
  • Technical changes are laid for disposals of land which are subject to Income Tax or Corporation Tax, and the payment deadline for Stamp Duty Land Tax will reduce to 14 days from 30 days in April 2018 (this change was to have been introduced before then).

What have I missed?

Concise Rural Taxation 2017/17 Now Available

Concise Rural Taxation (formerly Taxation for Students of Rural Land Management) is now an annual publication.  This year’s edition is now available. Continue reading “Concise Rural Taxation 2017/17 Now Available”

Budget 2016: Rural and property points

Headline points from the 2016 Budget for the rural economy and property. Get out of sugar, get into tunnelling, run a micro-business on the side, infrastructure needs you, take your capital gains now, incorporation is looking better and better unless you intend to sell your professional services to the public sector, drink whisky and beer not wine. Despite this, old age and death are beginning to look expensive.

A £3.5 bn reduction in public expenditure is not intended to dent George Osborne’s claim that, “We [ie the Conservative Government] are the builders”. Practically this means Continue reading “Budget 2016: Rural and property points”

Accommodation provided by employers: some taxing questions

The government is seeking evidence on the taxation of employer provided living accommodation.  An explanatory document has been issued and the deadline for responses is 3 February.  It is worth reading for its clear explanation and examples of just how complicated the taxation of employer provided living accommodation has become over the last forty years or so.  It can be found at this link: Government consultation on employer provided living accommodation.

One particular question of the 16 caught my attention.  It’s number 10, and it asks:

Do you agree that using market rental value would provide a simplification to the tax rules on provided living accommodation? How could such a system work and what would be the impacts on both employers and employees?

I wonder what the effect of this might be on rural employees who live in houses which might be considerably larger or more expensive than they would otherwise choose, or indeed than they may be able to afford?  I have devised a simple survey which will allow some data to be collated if we can gather enough responses.  Some of the questions ask how many people of different ages live in the accommodation.  This will allow comparison with the maximum size of accommodation that would be acceptable for Local Housing Allowance purposes.  Please complete the survey by the end of January and this will allow the responses to be collated in time for the government’s deadline.

This link: Accommodation Survey will take you to the survey.  Thank you for your help which could be most valuable in providing evidence for the government’s review.

Inheritance Tax Residence Exemption: Even more smoke and mirrors from the 2015 Summer Budget

The fanfare for this Summer’s July Budget trumpeted the arrival of a £1 million IHT exemption for the family home.  The detail is not so clear cut.  Chancellor George Osborne has introduced a new residence exemption from IHT.  It works like this. Continue reading “Inheritance Tax Residence Exemption: Even more smoke and mirrors from the 2015 Summer Budget”

Summer Budget 2015: Rural Points – More smoke and mirrors

The Inheritance Tax changes will be the headline grabbing feature for many rural property owners.  But is all what it seems?  A few other budget points also need attention if you’re interested in rural property and farming.

Business-wise the decision to set the Annual Investment Allowance at £200,000 permanently from January 2016 is important, and relatively welcome. Continue reading “Summer Budget 2015: Rural Points – More smoke and mirrors”