26 January 2015 | Online since 2003



Farmers face substantial tax bills over TB slaughter


Beef and dairy farmers whose cattle were slaughtered due to TB could face substantial tax bills, according to agricultural accountants.

Last year, almost 33,000 cattle were compulsorily slaughtered, with some farmers losing a large proportion of their herd.

Aside from the emotional and financial stresses involved, losing large numbers of animals can also result in a steep hike in tax, said Andrew Vickery, head of rural services at Old Mill.


“The problem occurs when the compensation for those cattle is paid, as it could fall into a different financial year to the purchase of replacement animals,”.

“If animals are held in a producer’s accounts as trading stock rather than on the herd basis, the compensation can lead to an abnormal profit, potentially turning into to a large tax liability.”


Where more than 20% of a ‘production herd’ is slaughtered due to disease, farmers running their accounts on the herd basis only have to bring compensation receipts into the accounts when the corresponding replacement animals join the herd, said Vickery.

“This has considerable tax advantages over the alternative trading system.”

Fortunately for farmers who hold animals as trading stock, they can retrospectively change their accounts to the herd basis from the beginning of the year in which the compensation is due, where more than 20% of a herd is slaughtered.

“This is potentially very useful for those not already on the herd basis who might be affected.”

Producers who prefer not to change to the herd basis can make use of an extra statutory concession to spread profits from the year of slaughter over the next three tax years to help manage their tax liability, said Vickery.

There are many pros and cons about the different structure of farm accounts.

“One of the downsides of the herd basis is that if the compensation paid is less than the value of the animal, the producer cannot offset that loss against tax – which they would be able to under the trading basis.”

However, if profits are made when more than 20% of the herd is sold or slaughtered at any one time, the uplift in value is generally tax-free. “As a rule, most farmers would prefer to opt into the herd basis, but can only do so under certain circumstances, such as adding or losing a partner,”.

“If you are unlucky enough to lose a large proportion of your herd to TB, it could be an opportune time to make the switch to the herd basis, if that is a suitable option for your business.”

Download



Comments


No comments posted yet. Be the first to post a comment

To post comment without approval login or register

Display name

Please enter your name

Email (optional)
Comment

Please enter your comment

Post Comment

Your comment submitted successfully.Please wait for admin approval.

Some error on your process.Please try one more time.



Jobs


19 January 2015
Senior Infrastructure Engineer - Windows 7/8, Server 2012
Other areas of responsibility will include managing the Microsoft Server and Active Directory environments, datacenter manage...

20 January 2015
Production Supervisor - Cutting
With excellent written and verbal communication skills and excellent analytical and numerical capability you will have the ab...

17 January 2015
Assistant Cook
Come and work in our award winning farm shop café and production kitchen. The successful candidate will need good home cookin...

10 January 2015
Retail Assistant
This is a great opportunity to join a rapidly expanding high end meat and dairy production business. Retail Assistant Twicken...

20 January 2015
International Development Manager
You will have obtained a dual qualification in both science (veterinary, agriculture or chemist) and commerce (Masters degree...




Top stories you may have missed
12 November 2014 | Arable
GM crops 'good for farmers and the envir...

GM crops 'good for farmers and the envir...

GM crops are good for the economy and can reduce the amount of pesticides u...


6 November 2014 | Cattle
Smaller European markets drive beef expo...

Smaller European markets drive beef expo...

Demand from smaller European markets has helped drive strong growth for UK ...


6 November 2014 | Agri Safety
Lack of engineers a 'ticking time bomb' ...

Lack of engineers a 'ticking time bomb' ...

A lack of engineers, not enough people promoting the land-based industries ...


4 November 2014 | Bees and Beekeeping
Bee action plan due: Last chance for bee...

Bee action plan due: Last chance for bee...

Environment Secretary Elizabeth Truss is launching the National Pollinator ...


4 November 2014 | Arable
Experts welcome financial boost for youn...

Experts welcome financial boost for youn...

Agricultural specialists have welcomed a potential financial boost for youn...


3 November 2014 | News
Supermarket competition on prices 'risks...

Supermarket competition on prices 'risks...

As retailers continue to participate in a highly competitive race to the bo...


31 October 2014 | Arable
New Defra farm figures 'underline volati...

New Defra farm figures 'underline volati...

New farm business income data from Defra, which focus on income from March ...


30 October 2014 | Agri Safety
Agriculture remains one of UK's most dan...

Agriculture remains one of UK's most dan...

Agriculture has remained one of the industries in which workers are most li...


29 October 2014 | Finance
UK farmland prices see 'substantial grow...

UK farmland prices see 'substantial grow...

Prime arable land in the UK has seen a substantial year-on-year growth in p...


27 October 2014 | Arable
Satellites to help farmers pinpoint dise...

Satellites to help farmers pinpoint dise...

A new mobile app for farmers able to pinpoint and identify disease, pests a...