NFU cautiously welcoming

AFTER recognising the difficult economic climate facing the country, the farming industry yesterday gave a cautious welcome to the emergency Budget measures made yesterday by the Chancellor of the Exchequer.

NFU Scotland's policy director, Scott Walker, accepted that balancing massive spending cuts with increased taxes as a route to reducing the country's deficit was always going to be difficult.

However, the union welcomed the extension in entrepreneurs' relief to 5 million and the reduction in corporation tax for small companies.

"Both of these steps are positive for business. However, we are disappointed that capital allowances will be reduced from next year.

"This will increase the cost of new investments to many existing farm businesses."

Walker also welcomed the government promise to look at a rebate on fuel duties in rural areas. This was, he said, "a huge issue for rural Scotland".

For those farmers involved in the tourist industry, there will be help with the reinstatement of the furnished holiday let allowance.

The NFU Mutual is the UK's largest rural insurance company and their personal finance specialist, Sean McCann, said he was surprised by many of the measures announced, which, he reckoned, should benefit farmers and farm workers.

"Overall, the Budget tackled public spending rather than increasing taxes wholesale, with a number of positive measures for farmers and the countryside."

There would be losers from the shift in taxation, he added. With farmers considering selling up, the biggest impact will be from the changes to capital gains tax, where the rate paid by higher-rate tax payers will shoot up from 18 per cent to 28 per cent with immediate effect.

"However, the rate of CGT for standard-rate taxpayers remains unchanged at 18 per cent and there was good news for farmers selling either one of their farm enterprises or their whole farm."

Echoing NFU Scotland's view, he said it was good news that entrepreneurs' tax relief has increased from the first 2m of qualifying gain to the first 5m being taxed at 10 per cent.

McCann also reckoned there was further good news for farming companies with corporation tax rates being cut to 20 per cent for small businesses from April next year.

On personal taxation, he pointed to the major benefits that low and middle-income earners under 65 will get with the 1,000 increase in personal allowances, again from next April.

"A major area of interest for us as the provider of pensions for many people in farming and rural businesses was the announcement that the basic state pension will be re-linked to average earnings from April 2011 with a minimum increase of 2.5 per cent," he said.

McCann also supported the consultation exercise promised into a possible rebate on fuel taxes for those living in rural areas. "As an insurer which is part of the fabric of rural life, we know this would be very welcome to people who have to drive because of the distances to local services – and the lack of rural public transport," he said.

With farmers able to reclaim business VAT costs, there would be no big impact with the VAT rise to 20 per cent next January, but McCann said there would be additional costs on personal spending.