What were the key items in this year's Budget for farmers and landowners?
Inheritance tax (IHT)
The ability to offset loans against assets chargeable to IHT on death is to be restricted - this came out of the blue and will not be subject to consultation. It has been common practice for many years for the borrowing used to acquire assets that will qualify for IHT business property relief or agricultural property relief to be secured against other assets that will be liable to IHT. For example, when making a loan to an individual for the purpose of buying a new business the bank may prefer to take a charge against the family home. The new rules will require the borrowing to be matched with the asset acquired, thereby resulting in potentially significant extra IHT liabilities for farmers and business owners.
Taxation of high-value residential property held by non-natural persons
Apart from a change in the acronym from ARPT (annual residential property tax) to ATED (annual tax on enveloped dwellings), no substantive changes have been announced to the draft legislation published in January 2013. It is not yet clear how exactly the exemption for farmhouses will apply, and the promised clarification from HMRC is not now expected until July, only three months before the 31 October deadline for claiming the exemption for the current year.
Heritage maintenance funds (HMF)
HMFs can be a very tax-efficient way of providing for the upkeep of heritage property such as historic houses, but so far take-up has been surprisingly low. One disincentive may have been a quirk in the existing legislation which could result in a double tax charge for beneficiaries of HMFs. The easing of this restriction with retrospective effect from 6 April 2012 has now been confirmed. This is welcome news and it is hoped that it will improve the appeal of HMFs.
Real Time Information (RTI) – beaters and harvest casuals
Under the new RTI regulations all people paid a 'wage' are now to be included on the payroll, even if their pay is below the earnings threshold. This means that beaters will have to be treated in the same way as all other employees and therefore included on the payroll.
HMRC has agreed that payments can be made each day but must be reported on the next payroll run and within 14 days. This causes a problem if a monthly payroll is in operation and the National Farmer' Union (NFU) is still trying to reach an agreement with HMRC.
Stop press: HMRC has announced that if you pay weekly or more frequently, but run a monthly payroll and have less than 50 employees, then RTI has been relaxed until October 2013. In the meantime you can continue to report monthly.
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