Last Chance for Welsh Dairy Farmers

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Dairy farmers in Wales have until this Friday to apply for an aid scheme worth £1,800.

The EU Conditional Aid Scheme is only open to dairy farmers in Wales and, specifically, those that were in milk production with a supply contract on 1 January 2016.

To qualify before the deadline at midnight on Friday 30 June, producers need to complete an online questionnaire with information about their farm business. In return, farmers will receive the payment by the end of September as well as a report, prepared by the Agriculture and Horticulture Development Board (AHDB), identifying business strengths and weaknesses and a comparison against industry performance indicators.

The link for the questionnaire as well as more information can be found on the AHDB website.

Farms with land falling outside of Wales can still participate in the scheme if the majority of the land is in Wales.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

DEFRA Revises TIFF Estimate

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DEFRA (Department for Environment, Food & Rural Affairs) has now published revised estimates which suggest Total Income From Farming (TIFF) in the UK fell by around 7.5% in 2016. This is significantly different from their original figure of 1.5% reported earlier in the year, with the Government blaming incorrect data accounting for the error in the previous estimate. The TIFF is calculated using income from farm production and subsidies, less costs.

The revised figures confirm the slump in the value of UK farm produce, resulting from falling production and poor prices for dairy and cereal farmers last year. This is perhaps surprising given that there had been some good news with improved productivity in the beef, sheep and pork sectors and the cost of fertilisers and feeds dropping. It seems, however that these factors were not enough to pull back the negative impact of falling revenues overall.

Despite income for farmers having dropped consecutively for the last 4 years, there is optimism that 2017 will see something of a recovery with commodity markets trending upwards at the present time.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Will Brexit Affect the Value of Your Farmland?

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Fears have been expressed by some land agents that agricultural land prices may fall in the UK, as a direct result of Brexit.

It is expected that the amount of subsidies, such as the Basic Payment Scheme, will decline once Britain leaves the EU, causing some farmers to re-consider their financial position.  Many are already struggling to make ends meet and a reduction in subsidy support, combined with a predicted interest-rate rise for borrowing, may result in many being forced to leave the industry.

As a consequence the demand for farmland could fall away, with the price per hectare dropping by as much as £1,000, despite it having remained fairly robust so far, at an average of around £7,500 for bare land.

However, even the experts admit it is difficult to predict the full impact of Brexit, with so many other factors coming into play, such as trade tariffs, pricing and food imports.  Post-referendum predictions of economic doom and gloom have not yet come to pass, so those in the industry would be wise not to panic at this stage.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

The General Election: What Will It Mean For Farmers?

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Following the announcement by Theresa May that there will be a general election in June, industry leaders in the food and farming sectors have called for all political parties to put agriculture at the fore-front of their policies.

The Food and Drink Federation in particular are asking all concerned to make clear their vision for food and farming post-Brexit.  It is important, says the Federation, that any future Government is focused on promoting growth and support in the agricultural sector, delivering a good deal for farmers to be competitive enough to make a substantial contribution to the UK economy.  With international relationships currently under immense pressure, now is the time for the country to look at how we can become more self-sufficient, particularly when it comes to feeding the population.

The Tenant Farmers Association have also delivered a list of priorities which they believe are crucial to ensure our farming industry flourishes as it should.  They include reducing the country’s reliance on imports, highlighting animal welfare and consumer safety and confidence, help with price volatility and long-term security for tenant farmers.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

24 Hours In Farming

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From 5am on 10 August to 5am on 11 August 2017, “24 hours in Farming” is back supported by FG Insight and Morrisons.  The aim of the event is for UK Agriculture to “shout about the industry and why they are so proud to work within it” and to show consumers how much passion and commitment goes into producing the food they eat.  Last year the event reached an audience of 112 million and trended in the Top 5 on Twitter all day.

You can get involved by posting photos and videos on any social media platform using the hashtag #Farm24 to let people know what you are doing that day.  This year, the event organisers are trying to make it bigger and better than last year by encouraging farmers to also host on-farm events, give talks to local groups or arrange interviews with local newspapers or radio stations.

If you are planning on opening your doors to the public, you can click this link to find a quick guide on how to get organised.

Are you a farmer or a landlord?

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There has always been uncertainty over whether a landowner is a farmer or a landlord for tax purposes. There has however, been a recent useful decision by the First Tier Tribunal in the case of John Carlisle Allen which has helped to clarify the capital gains tax position (and the valuable entrepreneurs relief/rollover relief ) on grass letting, and what constitutes trading or investment activities by the landowner.

The facts of the case are:

  • Mr Allen and his brother grew the grass which was eaten mainly by Mr Crooks’ stock.
  • The Allens maintained the rights to lairage – temporary housing of animals on the land, supplied fertiliser when needed, maintained fences and drainage, supplied water and engaged a Contractor to cut the weed and hedges.
  • Mr Crooks could graze stock or take silage off between 17 March and 1 November and claim the subsidy for part of the time. He was not permitted to spread artificial fertiliser on the land, only farmyard manure. He had to control his stock and repair any damage caused by them.
  • The Allens occasionally supplied fertiliser free when the grass was getting weak, but this did not happen every season.
  • The ground was left to recover over the winter for fear of poaching.
  • The £1,000 paid a year was described in the agreement as a “licence fee” rather than rent.

The Judge found in favour of the taxpayer. He stated that the Allens had demonstrated an awareness of the land and its condition and the need to maintain it. The actions were not one of a property investor. Although Mr Crooks was taking the grass, it was the Allens who were farming the land by managing it in such a way as to maximise the grass crop produced and maintain its quality. Their input into the husbandry of the land was critical.

So what can landowners take from this case if they wish to be classed as a farmer rather than a landowner?

  • Keep a diary or record of what you do from day to day, month by month.
  • Keep clear detailed notes to record the work undertaken and management carried out.
  • Carry out soil testing every few years, and take advice on applying the right quantities of lime, phosphate etc., to correct soil deficiencies, minimise wastage and maximise the crop.
  • Carry out weed control.

There are, as stated above, valuable capital gains tax reliefs which apply to a trade but not to the letting of land. Make sure you are in a position to utilise them if needed.

For further information please contact the tax team at Green & Co on 01633 871122.

HMRC, The Dairy Farmer & The Disallowed Loss

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The recent case of B and R Scambler v HMRC (TC4842) reinforces HMRC’s refusal to accept farming loss claims where they deem that the farm is not being run on a commercial basis. And there are many cases of this nature going to Tribunal.

Assuming all criteria is satisfied, self-employment losses can be offset against other income received in the year. This is known as sideways loss relief and is available to Farmers.

This loss relief is unavailable however, where a farming business has made losses in five consecutive tax years, known quite succinctly as ‘the Five Year rule’. In this instance the farmer cannot offset losses incurred in the sixth or subsequent years until there is another profit, unless he can show that “a competent person carrying out the activities at the beginning of the prior period of loss could not have reasonably expected the activities to become profitable until after the end of the current tax year.”

Mr & Mrs Scambler, who made losses from 2005/06 through to 2010/11, could not identify a specific reason why profits could not be made during these years, despite running the business competently. Their claim that the milk price was unpredictable was not thought to be sufficient justification, and they were therefore denied sideways loss relief for 2010/11.

If you would like to discuss this further please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Fire Service Appeal To Farmers Planning Controlled Fires

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South Wales Fire and Rescue Service have advised farmers who are planning to ‘burn off’ their land, that they now have a dedicated Wildfire Station to assist them.

While the vast majority of these burnings are done under safe conditions, on limited occasions fires can become too large to manage or out of control with farmers having insufficient resources to deal with them. South Wales Fire and Rescue Service are actively looking to engage with local farmers and can offer advice and practical assistance by carrying out controlled burning for them.

If you would like assistance with controlled burning on your land, please contact the Fire Crime Unit on 0800 731 7287, where they will be able to direct you to the appropriate Station Commander.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

New Small Grant Scheme for Welsh Farmers

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The new tax year brings some good news for farmers as the Welsh Government has announced it has earmarked £40 million for a new Small Grants Scheme in Wales to “help farmers transform their business”.

The scheme will be part funded by the Rural Development Programme, and will offer support over a 4-year period for up to 40% of eligible costs in the following areas:

  • Animal health, genetics and performance
  • Crop management
  • Energy efficiency
  • Resource efficiency
  • Information and Communications Technology (ICT)

The maximum grant will be £12,000 and around 80 items will qualify as eligible costs in the relevant categories.

It is hoped the scheme will enable farm businesses to be more competitive, whilst being more efficient, more diverse and environmentally aware.

The move is linked to the Welsh Assembly’s 5-year programme of “Taking Wales Forward”, and is expected to be open for applications in April 2017.  Further details will be available shortly on the Government website.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Concern For Rural Businesses Over Changes to Business Rates

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The Countryside Alliance has joined rural businesses and local councils in expressing concern over changes to business rates being proposed by the Valuation Office Agency (VOA) and the Government, with Welsh MP, Glynn Davies, even declaring there could be an “uprising” as a consequence of the proposals.

The changes, expected to be implemented in the coming tax year, involve the revaluation of properties, apparently focusing on the size of a premises, regardless of the nature and profitability of the business utilising it.  A spokesperson for the Countryside Alliance has suggested that many smaller rural enterprises who may have enjoyed rate relief in the past could now face significant increases, which could have damaging consequences.

Most likely to be affected are riding schools, kennels, stud farms and vineyards.  A recent report by the Association of Convenience Stores clearly shows that many such businesses provide an “immense social role” and are an integral part of rural life. As such, the negative effect of increases in business rates on rural communities could be substantial.

All concerned parties have called for the VOA and the Government to re-consider their proposals, suggesting rural businesses require extra support rather than becoming “disadvantaged” by the proposed revaluations.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.