The doubling of investment allowances announced in this week’s budget has been lauded by farming leaders, but the fuel duty hike has prompted groans.
Farmer’s Weekly invited a number of key industry figures to give their reactions to the 2010 Budget as it happened.
Of particular interest to the panel was the decision by Alistair Darling to double the Annual Investment Allowance. Tom Hind, Head of Economics and International Affairs at the National Farmer’s Union, says:
“Doubling the Annual Investment Allowance (AIA) from £50,000 to £100,000 is good news. It's not the same as the Agricultural Buildings Allowance (ABA), but will be a benefit to farmers looking to invest profits back into their businesses.”
David Douglas, divisional director and head of agriculture at Clydesdale Bank, agreed that “plant and machinery investment allowance doubling to £100,000 should benefit the farming sector.”
With no mention of the 40% First Year Allowance, those farming businesses using more complex structures will need to consider how investment in machinery should be made.
Carlton Collister, senior tax adviser at Grant Thornton
Complex structures
However, a leading tax expert begs to differ. “Many farms use more complex structures that do not qualify for the AIA,” says Carlton Collister, a senior tax adviser at Grant Thornton for 20 years.
“With no mention of the 40% First Year Allowance, those farming businesses using more complex structures will need to consider how investment in machinery should be made.”
The fuel duty increase, unsurprisingly, didn’t go down too well with the farming fraternity. David Douglas explains why: “Fuel duty increases always have a sharper impact in rural areas, of course, due to the dependence which businesses have on private, rather than public transport.”
However, the impact of the rise is at least lessened because it is staggered, with the first 1p rise coming into force from 1 April and the second rise delayed until 1 October.
The rise in Stamp Duty Land Tax, according to one tax specialist, is unlikely to have a significant effect on agricultural land holdings. Catherine Vickery of Old Mill Accountants LLP says: “Stamp Duty Land Tax is only at the increased rate of 5% on residential property, as commercial and mixed property will remain the same at 4% over £500,000.
“However, care will need to be taken where a property and land are being purchased separately, as I anticipate now there is a difference in rates. They may look at these sorts of transactions more closely.”
The freezing of Capital Gains Tax (CGT) at 18% was a surprise, however, and could affect the timing of putting up farms for sale. “I can’t see it staying there – businesses need to plan to make any sales or transfers of property before the next budget, possible considering moves to trigger early exposure to CGT,” advises Vickery.
The 10% hike on cider tax, meanwhile, says Tom Hind, “will be a blow to our top-fruit growers.”
