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Farming & Rural Business Community

Budget 2021 – calm before the storm?

Author: Elizabeth Peters FCA CTA, Tax Partner, Ballards LLP

Published: 04 May 2021

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A summary of how this year's Budget will affect the Farming & Rural Business Community.

Budget 2021:

  • A budget delivered in the midst of a global pandemic following a year of measures pumping money into the taxpayers’ hands amid the expectation of tax rises as the Chancellor struggles to balance the books
  • A budget anticipated with trepidation following the IHT and CGT recommendations of the Office of Simplification and the major recommendations to reform IHT put forward in the All-Party Parliamentary Group at the end of January
  • A budget which saw farmers rushing to pass land down generations or into trust in advance of feared changes to CGT and IHT
  • A budget which seeks to stimulate economic recovery with:
    - A temporary 130% super-deduction for capital allowances for qualifying expenditure in the period from 1 April 2021 to 31 March 2023 but:
    > Only for farmers trading through a company
    > To encourage capital investment and match the deduction that large companies will receive when corporation taxes are hiked to 25% in 2023?
    > Only for expenditure on plant and machinery which is new and unused
    > The balancing charge on a sale before 1 April 2023 is multiplied by 1.3
    - A temporary extension to loss relief with businesses (incorporated and unincorporated) able to carry losses for 1 April 2020 to 31 March 2022 (6 April 2020 to 5 April 2022 for unincorporated businesses) back three years. Not as generous as it appears on first sight:
    > Losses are carried back against the later years first 
    > There is an annual cap of £2m on the losses that can be carried back and set against the profits of earlier two years and, for income tax, the carried back losses can only be used against profits of the same trade.
    > The annual cap is apportioned between the companies in the same group
    > And the impact to farmers averaging claims????
    - An extension of 12 months to the temporary increase in the annual investment allowance to £1,000,000 so this continues to 31 December 2021
    - An extension of the SDLT exemption on residential property to 30 September 2021 but only on the first £250,000 of consideration from 1 July 2021 and remember the 3% rate for additional properties still applies
    - An extension of the temporary 5% reduced rate for hospitality and tourism sectors to 30 September 2021 and then a temporary rate of 12.5% to31 March 2022 but watch the tax point when arriving at the rate to charge
  • A budget hinting of tax rises to come with the freezing of allowances left right and centre and the announcement of an increase in the main rate of corporation tax to 25% from 1 April 2023?
*The views expressed are the author’s and not ICAEW’s.