As we approach the end of another tax year, it seems like a good time to look at the tax changes already announced for the year and also speculate on what could be introduced in the coming months.
2019 was unique to recent years, in that due to the political upheaval caused by Brexit, we did not have a Budget. This thankfully meant that we have had fewer changes in legislation to cope with, but we have a Budget scheduled for 11th March and the Conservative Party election manifesto gives us a few clues about what might be announced.
There was no pledge in the Conservative party manifesto regarding rates of Capital Gains Tax (CGT) so there could be changes. At present, rates vary from 10% to 28% depending on the type of assets sold and the level of a person’s income. Residential property is currently taxed at higher rates than other assets.
Where business assets are sold, the availability of Entrepreneurs’ Relief can reduce the rate of CGT to 10%. This is an extremely complicated relief and both the Conservative and Labour parties pledged to reform or abolish it in their manifestos. We are therefore expecting an announcement on this in the Budget.
There is another practical change being introduced on 6th April 2020 which property owners need to be aware of. Currently a capital gain on the sale of a residential dwelling is entered on a Self Assessment Tax Return and the tax is paid on 31st January following the end of the tax year. For sales of residential property completing on or after 6th April 2020 it will be necessary to notify the sale and pay the tax to HMRC within 30 days. This will require farmers to plan ahead to ensure they have all the information needed to calculate the gain before the sale completes.
There was no mention in the Conservative manifesto regarding Inheritance Tax (IHT) but the previous Chancellor of the Exchequer commissioned a report from the Office of Tax Simplification regarding the operation of IHT. This reported in the summer of 2018 with a number of recommendations, which we covered in these pages last year. It will be interesting to see if any of these are implemented in the Budget.
In particular, restrictions on Business Property Relief for non-agricultural assets and the CGT treatment of inherited assets could both adversely affect farming businesses.
For more information or advice about how any of the above might affect your farming business, email or call David Threlkeld on 07833 581971Contact David
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