Agriculture and the Budget

Published by Simon Budden on 3 March 2021

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Looking at the rural sector and its many diversified activities, Mr Sunak’s second budget was broadly benign, at least for now, particularly considering some of the adverse changes predicted by many. Given the cost of the support measures delivered and signposted, it can only be a matter of time before we see some measures to increase tax revenues.

The Budget, including earlier disclosures, did however include a number of matters of interest to diversified businesses in our sector.

Corporation Tax

The main rate of Corporation Tax will rise to 25% with effect from April 2023, with businesses with profits below £50,000 still being taxed at 19%. A tapering mechanism will apply to the effective tax rate on profits between these levels.

Super-deduction for investment

From April 2021, companies investing in new plant will benefit from a 130% first year capital allowance. This incentive is due to be available until March 2023 and could be particularly attractive to new viticulture enterprises adding or extending production facilities.

Loss relief

The relief for the carry-back of losses will be extended from one to three years for 2020/21 and 2021/22 for companies and the self-employed.

Personal allowance and higher rate tax band

These will both rise in line with the Consumer Prices Index (CPI) from April 2021 and will then be frozen until April 2026.

Inheritance tax and Capital Gains tax

The capital gains tax exempt amount and the inheritance tax nil-rate band, including the residence nil-rate band, will be frozen until April 2026. It seems likely that even if exemptions and nil-rate bands are left unchanged, tax rates and or reliefs will be tweaked at some point in the near future.

Self-Employment Income Support Scheme (SEISS)

For qualifying individuals, support payments will be available for the period of February to April and April to September. Claimants for the 4th and 5th grant will need to have submitted their 2019/20 tax return, and the 5th grant will be discounted if your income has fallen by less than 30%.

Coronavirus Job Retention Scheme

The scheme will remain open to qualifying businesses till the end of September 2021, with an employer contribution of 10% in July and 20% in August and September. Employers will still be required to fund pension contributions and National Insurance costs.

VAT reduction for hospitality

The existing reduced rate will be extended to 30 September and this will then increase to 12.5% until 31 March 2022. Based on data from last summer, it seems likely that activity in this area could recover quite quickly, subject to the timing of reduced restrictions.

Business rates relief

Eligible businesses will continue to receive 100% relief in the period from April through to June and will receive 66% relief for the period from July to March 2022.

Recovery Loan Scheme

This scheme will replace the existing CBILS arrangements on less agreeable terms but will continue to be backed by an 80% Government guarantee. If you have an existing qualifying requirement, it may well be worth exploring facilities under the current scheme.

The points noted above are an abridged summary of certain key points. More detailed advice should be sought before implementing material business decisions.

We will be regularly updating the Budget pages of our website. If you would like to discuss the implications, please don’t hesitate to get in touch. Alternatively, book your place on our Budget question time webinar on Friday 5 March 2021 to find out more.

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