2016-01-13 |
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Farmers Should Act Now to Defer January Tax Bills
Farmers who are still waiting to receive their full Basic Payment should consider asking HM Revenue & Customs if they can defer their January tax bill, according to accountant Old Mill.
Although the Rural
Payments Agency (RPA) was aiming to make
most payments by the end of December 2015, thousands of farmers
are still waiting, with many unsure when to expect the money
to arrive.
“There is no question that this is putting tremendous
pressure on farm cash flows and it’s clearly most unwelcome that
this pinch point is coming at a time when commodity prices are
at such a low level,” says Mike
Butler, director of rural services at Old Mill.
Mike Butler
Many businesses will have to pay their tax bill before the end of January, whether they are sole traders or partners, or limited companies with a March 2015 year end. “On the whole, trading results were reasonably firm in 2014/15, so many farmers will have tax to pay despite the current downturn in revenues,” he adds.
In order to minimise the tax due, farmers should revisit their self-assessment returns and reduce payments on account for 2015/16 to reflect the lower commodity prices. “There may also be the potential to recover any tax due for the previous year, whether through farmer’s averaging or other means, so it’s vital you act now to get plans in place before the 31 March or 5 April year-end.”
However, Mr Butler also wants HMRC to consider concessionary measures to allow farmers who have not received the Basic Payment to defer their tax payments at least until the money has been received.
“There is no automatic right to set off, but there is certainly scope to contact HMRC to explain the situation and come to an agreement regarding tax payment terms,” he says. “Seeking this kind of clarity in advance should help avoid potential late-payment penalties. Although paying interest may seem regrettable, HMRC’s rates are not materially dissimilar to bank lending rates, so many businesses may look to take advantage of any such opportunities now.”
However, farmers should act fast, as the 31 January deadline for tax payments is looming, warns Mr Butler. “Contact HMRC now to arrange payment terms – that way you can budget ahead and avoid the risk of late payment penalties.”
