FARMER: Keep an eye on your tax, say AC Mole (From Somerset County Gazette)

FARMER: Keep an eye on your tax, say AC Mole

12:44pm Monday 28th May 2012 in Farmer

WHEN you look at your land, your thoughts are rightly focused on the crops, the livestock and the seasons. Tax is generally the last thing on your mind, writes DAVID PERRY of AC Mole.

When I look at the same scene, tax is very much in my thoughts. I have seen too many situations over the years where a large tax bill was the unintended consequence of a business decision. Let me give you some examples based on cases I have advised on.

You are about to take out a new bank loan secured against the farm, but you also have some rental properties. If you secured the loan against the rental properties instead, you could well reduce your inheritance tax bill.

You have been negotiating to sell some land for several years and the sale is at last in prospect.

You should check that the capital gains tax consequences are still as you expected, as the law has changed significantly in recent years.

A member of the family is about to retire, or reduce their involvement in the business.

You should ensure that the arrangements are tax efficient. It is easy to overlook the fact that a loan left in the business may become exposed to inheritance tax. It is also easy to find that living arrangements post-retirement create tax issues. And remember that business interests may be taken into account by the local authority if someone goes into care.

It is also worth discussing the most basic issues such as the farmhouse: it may be a farmhouse to you, but is it a farmhouse to the tax man? Many farming families have been shocked to find that the courts take a view they would not have expected. A timely discussion on this with your accountant could pay for itself many times over.

And then there is the business structure: limited company or partnership or both? Who should own the assets? What are the tax effects of granting leases?

Every major business decision is likely to have a tax consequence. While it is often possible to structure a decision to minimise those tax consequences, it is rarely possible to do so after the event.

Talking to your accountant before you act could yield some very worthwhile returns.