Farmers and rural businesses have been encouraged to consider incorporating following the announcement by UK chancellor, George Osborne, of a planned cut in corporation tax (CT) rates to a “remarkably attractive” 15%.
The advice comes from rural accountants, Old Mill, whose chairman, Mike Butler, said that even though we don’t yet know when the drop to 15% will happen, but it would be “sensible” for farmers to weigh up the options of incorporation sooner rather than later.
He was commenting on the chancellor’s announcement, made earlier this week, of plans to cut CT from 20% to 15%, a development which Old Mill believes looks “remarkably attractive” when compared to the 20% income tax for sole traders and partnerships.
“Although farm incomes are under intense pressure at the moment, there are signs that commodity prices are starting to improve, aided in part by the weaker pound, and everyone is working in the hope that agriculture will return to profitability in the future,” said Mr Butler (pictured above).
“Whatever the level of profitability, retaining as much of your hard-earned income as possible by minimising tax bills is a sensible option and perhaps the key to survival.”
He did added, however, that there are a number of areas that will need to be considered carefully by those who are considering making a change. These include the need to look at such areas as Inheritance Tax and Capital Gains Tax, and the knockon impact on securing Agricultural Property Relief under certain circumstances.
Mr Butler also said that other considerations, when incorporating a business, include making sure Wills are redrafted, drawing up a shareholders’ agreement to clarify matters in the event of a dispute and managing the accounts.
