Down Rural Business Barriers
Country Land and Business Association (CLA) has written to Chancellor
Gordon Brown urging him to address inequalities in the current tax
system that force extra burdens onto rural businesses.
Regional Director North, Douglas Chalmers says: "Diversification
into non-agricultural activities is essential for the survival of
many farm businesses and the growth of the rural economy. But the
distinctions between different types of operations made by the current
tax regime is a major hindrance to many country businesses, which
are becoming increasingly mixed in nature."
example, a farm with a farm shop, tourist accommodation, livery
and commercial lettings of redundant barns is a mix of Schedule
A and Schedule D activities - an artificial division under the current
tax system. Thus the farmer has to prepare separate accounts for
each of the diversified activities in order to complete income tax
takes time and money, and both these commodities are scarce in smaller
businesses, especially those just starting to diversify," added
Mr Chalmers. "So in fact, the current tax system simply creates
a disincentive to enterprise. It also means that profits earned
in one section of the business cannot be offset by losses made in
another. We want to see all activities carried out under the umbrella
of a single economic enterprise treated as one business for income
tax purposes . "
The CLA is urging Gordon Brown to remove the fiscal boundary between
Schedule A and Schedule D and treat all activities carried out under
a single economic enterprise as one business for income tax purposes.
Association is also making two further recommendations to the Chancellor.
Firstly, that landlords should be granted the right to defer payments
of capital gains tax from the sale of assets when the payments are
re-invested into let units. Secondly, that the definition of agriculture,
for the purpose of agricultural property relief from inheritance
tax, be widened to ensure both landlords and their tenants can consider
diversification without the landlord incurring future capital tax
liabilities .These two recommendations were also proposed by the
Tenancy Reform Industry Group, which presented its recommendations
to Ministers in June.
the current tax system, when a tenant wants to diversify into non-agricultural
activities on an existing agricultural holding, the landlord will
lose his agricultural property relief from inheritance tax . This
may mean it is in his interest to resist diversification, despite
its potential benefit to both the tenant and himself.