Concerns over Corporation tax

That’s according to the Omagh-based accountant Seamus McCaffrey.

He added: “Put simply, increases in Corporation Tax serve to reduce the levels of profit retained by farming companies and, as a consequence the amount of money available to invest back within these businesses.

“And, of course the opposite is the case when rates are reduced.”

A growing number of local farming operations are making the decision to convert to companies.

In these instances, the directors of the business pay personal income tax at PAYE levels, usually 20%, while the company itself is subject to corporation tax: the main rate currently set at 19%.

Seamus McCaffrey again:“However, the main rate of Corporation Tax is due to increase by 6%, up to 25%, at the end of March next year.”

But all this could change, given the different stances being taken on tax by the two candidates in the ongoing Conservative Party Leadership contest.

Liz Truss wants to cut tax levels with immediate effect, should she become the next Prime Minister on September 06 while Rishi Sunak wants to maintain rates at current levels.

Seamus McCaffrey is a specialist on tax matters as they relate to the farming sectors.

He continued:“The structure of their farming business is discussed with clients on an annual basis. Farmers can trade as one of three legal entities: sole traders, partnerships or companies.

“The decision to trade in a certain way is dictated by the circumstances prevailing at any particular time.”

Meanwhile, McCaffrey is strongly advising all farming business to carry out a farm accounts’ update right now.

This reflects the growing challenge of fast-strengthening input costs that have been impacting on all farming operations for the past number of months. During this period, fertiliser costs have quadrupled while feed and energy costs have doubled.

The Omagh-based accountant further explained:“Farmers should seek professional accountancy advice on this matter, if required.

“But in tandem with this producers should also undertake a full cash flow assessment of their businesses.

“Given the reality of where we are, increasing pressure on cash flow is now a reality for all farming businesses.

“Input costs continue to increase and the tax situation remains challenging.

“There are also indications that silage quality has dipped this year, relative to 2021. In turn, this may well necessitate the feeding of enhanced levels of meal to stock next winter.”

McCaffrey further concluded:“All of these issues are adding to cash flow pressures. In many cases farmers may wish to secure increases in their overdraft facilities.

“And while the banks are very predisposed to such suggestions, they will want to see up to date accounts and realistic cash flow projections before making any final decisions in this context.”