Accountant offers farmers way to save tax

Date: 19th August 2008

An accountant has claimed that farmers who have recently incorporated into a limited company could save significant sums as they are entitled to receive their single farm payment (SFP) tax free.

Accountant Mike Butler explained to the Farming UK website that small businesses incorporated after the introduction of SFP can receive part of it without paying tax by shifting the entitlement to the new limited company or corporate partner.

The expert explained that this was not only a handy tax write-off, but also a way to extract profits without paying extra tax.

"SFP entitlements are classed as intangible assets, enabling companies and corporate partners to write off the cost of acquiring them against their income," Mr Butler told the site.

"Although the transfer could incur a capital gains tax liability, the introduction of entrepreneur's relief on incorporation will significantly reduce that bill. And the ongoing tax savings will far outweigh the potential tax on the transfer of the entitlements."

In total, Mr Butler suggested that the average small farm could have saved as much as £35,000 in tax by incorporating after the SFP was introduced.

However, he said that it was also important the bosses considered "all the other consequences of incorporating".

The government explained that the SFP is the principal agricultural subsidy scheme in the European Union.