July 23 2014 Latest news:
Monday, July 23, 2012
Tax changes could bring an unexpected shock for unincorporated businesses including farmers, it was claimed yesterday.
Chancellor George Osborne unveiled plans last year to reduce an Annual Investment Allowance (AIA) which will make itself felt in January 2014.
But David Missen, agricultural partner at Larking Gowen, said the changes could see a “painful shock” for some.
He said a farmer who had achieved a profit of £160,000 per annum but reinvested £100,000 back into plant and machinery would have been paying, in recent years, about £8,700 every six months in tax and national insurance.
“But the actual liability for 2012/13 will be about £46,500 - nearly three times the liability for the previous year, although the business is no more profitable,” he said. “If he has two young children, there will be an additional child benefit clawback of £1,800 so when one takes into account the first payment on account for 2013/14 he could face a tax bill of almost £55,000. In cash flow terms this represents almost all the cash remaining in the business.
“This tax is likely to affect all significant unincorporated businesses to a greater or lesser extent, although clearly the size of the fluctuation will depend on personal circumstances,” he added.
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