Farmers face substantial tax bills over TB slaughter
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.”
No comments posted yet. Be the first to post a comment
Please enter your name
Please enter your comment
Your comment submitted successfully.Please wait for admin approval.
Some error on your process.Please try one more time.
Butchers in the UK are losing a generation through lack of training opportu...
NASA research has revealed how dust blown from the Sahara desert helps supp...
“In the run up to the Budget 2015 most commentators were predicting that th...
The UK’s first fully operational floating solar panel system has been unvei...
Axing the badger cull in England and Wales will save more than £120 million...
By 2025, solar power could become one of the cheapest forms of energy in ma...
Demand for Scottish farm land remains strong and continues to be better val...
The Welsh red meat industry should aim to increase sales by at least 34 per...
Fears about the impact that a proposed transatlantic trade agreement could ...