The Courier & Advertiser (Fife Edition)
Report calls for doubling of tax rates
The publication of the Office of Tax Simplifications ( OTS) review on Capital Gains tax may make farming businesses reconsider impending land transactions and overall business ownership.
Currently, if a farmer were to sell an individual field which they actively farm they would pay tax at 10% on any gain up to £50,000 and 20% on anything further, assuming no other income.
The report recommends that the government should consider aligning Capital Gains Ta x rates with Income Tax rates, resulting in the doubling of tax rates.
The report goes on to address the annua l exemption, which currently stands at £ 12,500, and suggests that if this was dropped to £2,500 there would be 360,000 more
people reporting a capital gain each year – resulting in £835 million additional revenue for the Treasury.
T he issue of capital transfer is extremely relevant for farmers. Under the current regime, when a farmer dies and passes on a qualifying farm , the recipient inherits it at the market value on death.
The recommendation is that the Capital Gains uplift on death is removed and the recipient is treated as acquiring the asset at historic cost . While controversial, this could provide an opportunity for farmers to pass on the reins sooner rather than later.
This is echoed in the report which recommends that Gift Holdover, a relief on passing business assets during life, should be easier to achieve.
Finally, the main relief farmers can rely on selling
a farm when they stop farming is Business Asset Disposal Relief, formerly Entrepreneurs Relief.
This relief allows for the first £1m gain on a farm sale to be taxed at 10% not 20%, saving up to £100,000. While the recommendation is that this relief is retained, OTS state it should be more akin to retirement relief with a minimum 10-year holding period coupled with a minimum age limit to qualify.
While these are just recommendations, this is the second such report the Chance l lor has commissioned in the past two years. Add to the mix the need to balance the country’s finances moving out of Covid-19 and it is entirely possible that, come the next UK budget, these measures are implemented.