RURAL businesses must study tax and other changes, says John Mitchell
Reform of legislation and regulation will affect businesses in the rural sector during the coming months. We recommend that rural business owners should consider the potential impact of the following reforms on their businesses:-
The Scottish Government’s Land Reform Agenda continues. The remit of the Land Reform Review Group appointed by Scottish Government includes enabling more people in Scotland to have a stake in the ownership, governance, management and use of land and to identify mechanisms to assist communities to acquire and manage land. Matters currently being considered by the group include what can be learnt from past community buyouts and community engagement with landowners, mechanisms to fund and support community purchases and how the benefits of community energy projects can be managed and distributed.
In parallel, the Agricultural Holdings Review Group led by the cabinet secretary for rural affairs and the environment is undertaking a review of agricultural holdings legislation in Scotland. The group is currently gathering evidence. The group will submit an interim report to Scottish ministers in June 2014 which will provide an update on the possibility of introducing an absolute right to buy for secure 1991 Act tenants. The group’s final report will be provided to Scottish ministers by December 2014. Further variation of the legislation governing agricultural tenancies is a likely outcome.
The key elements of Common Agriculture Policy (CAP) Reform have been agreed in Europe. The Scottish Government is currently consulting on implementing measures in Scotland. Key changes arising from the reform include a transition from the value of new entitlements being based on farming history to an area base, an active farmer test, minimum stocking requirements, internal payment areas, provisions for new entrants and proposals relative to environmental requirements. The changes will potentially affect the day to day management of some farms and the commercial return derived from them.
The mechanisms by which the UK government supports generation of renewable energy remain subject to ongoing review. Support is likely to reduce or possibly be discontinued in future years.
The Feed–in Tariff (FIT) for some solar PV systems will be adjusted downwards from 31 March 2014. On a more positive note, the Renewable Heat Incentive (RHI) will extend to domestic properties in 2014. Homeowners will be able to claim a payment for every unit of heat produced by an eligible renewable source such as a biomass boiler or ground source heat pump.
The requirement for businesses with fewer than 50 staff to auto enrol staff into workplace pensions will commence in 2015.
There have also been recent tax changes that affect rural businesses. The Finance Act 2013 removed the ability to mitigate Inheritance Tax liabilities by securing business debt after 6 April 2013 against assets that do not qualify for relief from Inheritance Tax, which would otherwise reduce their taxable value. For farmers looking to diversify into furnished holiday letting, HMRC success in a tax tribunal case makes it more important than ever to look at businesses very carefully to see if the level of activities which enhance the holiday experience will enable a claim for exemption from Inheritance Tax.
Separately, HMRC announced proposals relative to mixed member partnerships. Mixed member partnerships include any partnership where a member is a non-individual such as a company. From April, the ability to allocate partnership profits to a member who is a non-individual to benefit from a lower rate of Corporation Tax is removed except in a few instances.
All these developments potentially affect many rural businesses. If you are a rural business owner we recommend that you consider if you are affected and, if necessary, seek appropriate professional advice.
• John Mitchell is head of rural business and agriculture at Anderson Strathern: www.andersonstrathern.co.uk