Farm Business Structures and Tax Planning

This guide gives farmers and landownders a basic overview of farm business structures and tax planning. It is laid out in an easily accessible format and will assist farmers and professionals with the specific taxation issues affecting agriculture. As well as providing the most up to date guidance on changes to taxation policy and rules, it is a key support document for anyone undertaking any financial or succession planning.

Foreword

The decline in farming income, Mid-Term Review of CAP, recent changes to the tax rules and high property prices have caused the farming community to plan and undertake big changes. For many, it has provided a good opportunity to review their business ownership, trading and lease arrangements. The choice of trading entity and business structure can be complex and the tax implications and advantages of any change need to be taken into account.

Farming has always been a unique industry and farm tax is complicated as it has its own set of rules. Farmers will need to consider issues such as tax reliefs that relate exclusively to the business of agriculture and have in place tax efficient succession plans for farming units that will be inherited generation after generation.

For those farmers seeking to achieve more diverse sources of income, including that earned from non-farming activities, close attention will need to be given to business, financial and tax planning. New enterprises or income sources could mean new tax management issues or opportunities.

Contents  

1. Types of business, business structure and transaction   
   1.1 Types of business
   1.2 Types of business structure
   1.3 Types of transaction
2. The farming business: taxation of profits
   2.1 Income tax - sole traders and partnerships
   2.2 Corporation tax - companies
   2.3 Value Added Tax
   2.4 National insurance and pensions
3. The farming business: taxation of assets
   3.1 Inheritance tax
   3.2 Capital gains tax allowances and reliefs
   3.3 Stamp Duty Land Tax
   3.4 Letting assets
   3.5 Single Payment Scheme and the tax implications
   3.6 Taxation of grants, subsidies and compensation
4. Tax and the diversified rural business
   4.1 Taxation of non-farming income
   4.2 Business rates
   4.3 Specific activities
   4.4 Other taxes
5. Glossary of abbreviations
6. Useful internet sites
7. Tax cases

Lloyds TSB Commercial is a trading name of Lloyds TSB Bank plc and Lloyds TSB Scotland plc and serves customers with an annual turnover of up to £15m.