Tinkerer’ s Budget gave us a bit and took a bit

Isn’t it ironic that as the country’s mood lifts due to the “promise” that Covid restrictions will be eased, that the farming community is in the midst of its own selfimposed annual spring lockdown that they call lambing, spring calving or spring crop cultivation.

When many reappear in the world outside the farm gate in April, they will find themselves in a new tax year with new questions to be asked. The first being, did the chancellor’s Budget on March 3 put a spring in the farming communities’ step for 2021 or wash away any positive feeling?

The 2021 Budget was never going to be the tax collection Budget, with support for a fragile economy paramount. Remember the Scottish Government already published its Budget on January 28 in which personal tax bands, LBTT rates etc were announced as “no change”.

The answer to the above question depends on how businesses are structured.

Many headline announcements only apply to farm businesses structured as limited companies, which are not commonplace in Scotland. The first and most headline grabbing is that of the “super deduction”, a new scheme that allows companies 130% tax relief on qualifying new (it cannot be secondhand) plant and machinery, meaning a reduction in corporation tax of £25 for every £100 spent post April 12021.

The phrase “what he gives with one hand he takes away with the other” is apt in this situation, with a planned increase in corporation tax rates from 19% to 25% for those businesses with profits over £250,000 taking effect from April 1 2023.

In addition, there will be a tapered rate for those businesses with profits between £50,000 and £250,000.

For those farming businesses with agritourism income, the extension of the 5% VAT rate reduction until September 2021 and a stepped increase to 12.5% for the following six months will be a boost to cashflow once restrictions are lifted. Furthermore, the Scottish Government continues to support hospitality, retail and leisure sectors through its Strategic Business Framework.

To support cashflow and lower the tax burden there was a welcome boost for all farmers in the shape of extended loss carry back rules, from one to three years for accounting periods ending between April 1 2020 and March 31 2022.

This can mean it is possible to grab tax refunds from earlier years because of poor trading or increased capital investment post April 1 2020.

The extension of the selfemployed income support schemes has been confirmed with the fourth grant available from late April 2021 covering the three months to April 2021. The fourth grant will follow the same criteria as previous claims with a requirement that the business has suffered a significant reduction in trading profits due to reduced activity or capacity to trade.

Whilst the reduction in farm gate prices is clear for those in potatoes and potentially red meat, due to the impact lockdown has on hospitality demand, it is less obvious for arable farmers, where demand and prices remaining high. However it should be noted that the fifth grant available in July will have a sting in the tail with an additional reduction in turnover requirement that many may fail to meet.

In addition to the direct tax changes a welcome freeze in fuel duty for a further year and no mention of changes to capital gains tax or inheritance tax or exemptions previously mooted should be well received.

In summary it was a tinkerer’s Budget, with some giveaways balanced with some takebacks.

While the Budget didn’t fan the flames of optimism nor did it dampen them as everyone strives to make 2021 a good year.

BUSY TIME: Farmers are in a self-inflicted lockdown with lambing, spring calving or spring crop cultivation.