Averaging and the Young Farmer scheme
8th June 2015 by Jonathan Wingfield
Looking at the fields on my way to work the majority appear to be healthy but it did strike me how exposed the farming industry is to weather, disease and world prices.
So what would happen if a budding entrepreneur went into Dragons Den to try and get investment to support their new farming business? I am sure it would go a little something like this:
My name is Jonathan Wingfield and I would like an investment of £10,000,000 to buy 1,000 acres of land and I will need a further £1,000,000 to buy the equipment to farm, expected return would be in the region of 1%.
At this point I think that I would hear “I’m out” in chorus from all dragons. Ok I know it doesn’t quite work like that but how many people would be farmers? Months before drilling anything, choices need to be made as what to grow, at this point yields and prices are not known and there is potentially a long time before money starts to flow in. Farmers love what they do and there is more to it than just the numbers, but the numbers must stack up to keep in business.
There have been recent proposals put forward by George Osborne which do help, with farmers averaging being extended from two years to five years with effect from 6 April 2016. There will be a consultation held later in the year, with legislation to be introduced in a future Finance Bill. On the face of it this could certainly assist with smoothing profits when crop prices are so volatile, which in turn smooth’s the tax bills from the peaks and troughs that would otherwise appear. With a period of five years to consider I do wonder how complicated the calculations could end up being if not clearly thought through but we have to wait for the details to be agreed.
With the recent changes to Single Farm Payment, DEFRA have introduced incentives such as the Young Farmer Scheme to encourage new entrants into the business. This is not something that I have seen a great level of uptake for but for a few clients this could prove to add a nice little bonus of up to £3,000 per year for five years. As normal, form filling is required together with a bit of assistance from your accountant/solicitor and there is the added complication that if over subscribed the annual payment could reduce, nothing is ever straight forward! A point well made with a few such “issues” (to put it mildly) with the new Basic Payment Scheme.
Hopefully these ‘incentives’ just mark the start of better things to come for the farming industry.
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