Philip Hammond’s first Autumn Budget proposals were generally taken as “dull but solid”. Certainly, he seems to have avoided treading on any banana skins, such as the failed proposal in March to increase the rate of self-employed National Insurance contributions. Here are some key points that farmers and landowners may need to bear in mind as they plan for the coming year.
- Tax relief (”capital allowances”) at 100% continues for equipment purchases up to £200,000pa. This is an important benefit for capital-intensive businesses such as farmers but timing of the expenditure is crucial to ensure tax relief falls into a tax year maximising relief.
- Entrepreneurs’ Relief continues to reduce the Capital Gains Tax (CGT) rate from 20% to 10% for qualifying gains up to £10 million on trading asset disposals. The Chancellor has not changed the rules for this important tax relief and so it may still be possible to reduce tax on farmland sales if planning is done in advance. However, business owners should check carefully whether they qualify for Entrepreneurs’ Relief, as this could be worth up to £1,000,000 in tax savings per individual.
- Stamp Duty Land Tax has been abolished on house purchases by first-time buyers who pay up to £300,000 and reduced for house purchases up to £500,000. This should provide some help for the next generation who want to live near the farm without relying quite so much on “The Bank of Mum & Dad”!
- The Inheritance Tax “nil rate band” increased by £100,000 from £325,000 on the value of family homes in April 2017. This may allow more wealth to be passed down to the next generation without tax being payable at 40%. The relief will also increase again by £25,000 in April 2018. However, the increase is restricted for estates valued at more than £2 million. This seems a generous figure but it is calculated before deducting agricultural and business property reliefs and so will rule out the benefit for many estates that include farmland.
- Until now, any company making gains on selling capital assets has been able to reduce the taxable amount by adding to the original cost an allowance based upon the Retail Price Index (RPI) between the dates of purchase and sale. This “indexation allowance” is changed for disposals of assets from 1 January 2018, so that the RPI increase will be frozen to the period up to December 2017.
- There is also a cloud looming for non-resident landowners who want to sell-up in the future. The Chancellor announced a consultation on CGT for disposals of immovable UK property from April 2019. There is already a CGT charge for non-residents who sell residential property and this looks like it will be extended to catch all UK land from 2019. The CGT charge will only apply to capital gains arising from April 2019 and it may be possible to claim Entrepreneurs’ Relief or rollover relief for disposals of farmland. However, it will be important for non-residents with long-term UK land investment to review their tax position.
