Preparing 2014 accounts – tax advice for farmers in Northern Ireland

Omagh-based accountant Seamus McCaffrey has told AgriLand that many farmers in Northern Ireland are now starting to finalise their accounting records as a basis for completing their 2014 Tax Returns.  Revenue & Customs have introduced some changes which are effective for the 2014 Tax Return.

He added:

“Firstly, farmers who trade as a sole trader or in partnership have the option to prepare the farm accounts on a simpler cash basis.  For income, its what the business receives, when it is received; for outgoings its what the business pays, when it pays.  Farmers can enter the cash basis if their business receipts for the year do not exceed the vat registration threshold, currently £79,000.  Farmers in receipt of tax credits can enter the cash basis if their business receipts for the year do not exceed twice the vat registration threshold, currently £158,000.  Limited companies are excluded from the cash basis,  as are those farmers who are in the herd basis or who wish to elect for farmers averaging.  There are some very specific rules about what can be claimed as expenses; for example, no deduction can be claimed for interest paid on a loan.  The decision as to whether to opt for the cash basis requires careful discussion with your accountant to accurately determine whether it is advantageous to your particular circumstances.  In addition, the cash basis of accounting may not allow the farm business to convey a complete account for banking purposes.

“Secondly, the 2014 Tax Return will be the first year when the new rules relating to the use of farm losses will come into effect.  Many farm businesses show a loss after claiming Capital Allowances.  The ability to offset farming losses against other income is now restricted to £50,000 or 25% of total income, whichever is the greater.  This change requires tax planning and may involve a sole trader introducing a spouse or partner into a partnership to have more individuals for £50,000 each of loss relief in a tax year.  In order to set a  farming loss against other income, the onus is on the farmer to prove that the farm business is being managed with the intention to make a profit.  Revenue & Customs may challenge a Tax Return if there is a loss every year.

Seamus also pointed out that last week’s budget in the UK confirmed  that the new Basic Payment Scheme (BPS) which replaces the Single Farm Payment Scheme (SPS) at the end of 2014 will be included in the list of eligible assets for roll-over relief claims.  This means that a farmer will be able to defer any gains arising on the disposal of payment entitlements under either SPS or BPS if the proceeds are invested into payment entitlements under BPS.

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