Blog: Financial challenges for 2017
By Angela Haig, a partner in EQ Accountants’ Forfar office
What are the challenges for the year ahead? There is a small amount of optimism among farmers due to higher crop prices, resulting in higher profits.
However, with higher profits comes a higher tax bill.
We will be working with our clients to plan for tax bills and help to reduce them where possible using appropriate tax reliefs and business restructuring if beneficial.
Pension planning may prove more popular where cash is available and given the more flexible options in drawing your pension and the benefits for estate planning.
There was no change to the tax relief available for pension contributions in the Autumn Statement.
The availability and cost of labour will be affected by Brexit with many agricultural businesses reliant on Eastern European seasonal workers to harvest crops.
You may also be faced with auto-enrolment into a pension scheme for your employees this year if you have not already done so.
It has been noted that the UK now has the highest property taxes in the developed world and landowners will have to deal with the complexities of the additional dwelling supplement (ADS) for any changes in ownership of residential property, the reduced value of £500,000 for ATED (a tax charge on residential properties owned by corporate structures) and the higher rates of capital gains tax on the sale of residential properties.
The review of business rates will also add to this burden.
Changes in legislation affecting the taxation of income from let residential properties mean a restriction in the tax deduction available for finance costs with affect from April.
Landlords may also start to feel the impact of the withdrawal of the wear and tear allowance for furnished let property which came into effect from April last year.
New accounting standards will come into full affect this year.
This will result in some noticeable changes to the presentation and content of financial statements for many.
Careful consideration will need to be given to the treatment of certain areas such as subsidy income, grant income, leases and holiday pay where the accounting treatment may change.
Herd animals are biological assets and must be included in financial statements at depreciated cost or fair value.
The method of keeping your accounting records may have to change to comply with the proposals of Making Tax Digital.
Regular submissions to HMRC via online software will require compatible computerised bookkeeping software kept up to date.
The Scottish Budget presented on December 15 confirmed no change in the Scottish Rates of Income Tax (SRIT) to the relief of many.
It also confirmed that Scottish taxpayers will not benefit from the increase in the higher rate tax band announced in the UK Autumn Statement, costing the Scottish taxpayer £314 for the 2017/18 tax year.
The SRIT only applies to earned income and not to savings and investment income and therefore only taxpayers with earned income exceeding the higher rate tax threshold of £43,430 in 2017/18 will be affected.
Inevitably, it will make the calculation of tax liabilities more complex and it will be important to ensure your tax residence status is correct.