COVID-19: Practical guidance for our rural and farming clients #26
In this week’s rural update:
- Government support available as we approach second lockdown
- Purchasing capital equipment – changes to Annual Investment Allowance (AIA)
- Less than six months to review your Inheritance Tax
If you have any questions about any of the below please do get in touch with your adviser in the first instance, or alternatively click here…
4th November 2020
Andrew Vickery See profile
On Saturday 31 October the government announced a second national lockdown from Thursday 5 November. This announcement introduced new support measures available for businesses including those working in the agricultural industry. Many farming and rural businesses will be grateful for this new support, particularly those who operate diversifications in hospitality and retail.
Self-Employment Income Support Scheme (SEISS) extended
The SEISS will be extended for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a three-month period.
The first grant will cover a three-month period from 1 November 2020 until 31 January 2021. The government will provide a taxable grant covering 55% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £5,160 in total.
The grant will be increased from the previously announced level of 40% of trading profits to 80% for November 2020. This therefore increases the total level of the grant from 40% to 55% of trading profits for 1 November 2020 to 31 January 2020.
Coronavirus Job Retention Scheme (CJRS) has been extended until December. Employees will now receive 80% of their current salary for hours not worked up to a maximum of £2,500 from November until December.
Business Grants available for those required to close. Businesses that are legally required to close in England due to local or national restrictions will be eligible for up to £3,000 of grants per month.
Mortgage Holiday has been extended so borrowers who have been impacted by coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months.
Government Support Schemes extended to 31 January 2021 including Coronavirus Bounce Back Loan (BBL), Coronavirus Business Interruption Loan Scheme (CBILS) & Coronavirus Large Business Interruption Loan Scheme (CLBILS).
We have produced an article with the full details of all the new support measures and grants updates here.
If you want to discuss and explore any of these government support options, please get in contact with your Old Mill adviser who will be happy to help.
If you’re considering purchasing capital equipment you may need to think quickly or risk missing out on significant amounts of tax relief over the next few years.
This is due to the anticipated fall in the Annual Investment Allowance (AIA) from £1 million to £200,000 from 1 January 2021. If a business incurs significant expenditure on plant and machinery before the end of 2020, it may benefit from tax relief on the cost much earlier than if the purchase is made in the new calendar year.
If a business incurs significant expenditure before 2020 it may benefit from the tax relief on the cost much earlier than if the purchase is made in the new calendar year. If instead, the same purchase is made in the first three months of 2021, it could take much longer for the tax relief to come through.
With all the other pressures on the Treasury at the moment and the postponement of the Budget, the temporary increase in the AIA looks like it will come to an end as originally planned on 31 December 2020. This makes it important for businesses to plan the timing of any significant amounts of capital expenditure particularly carefully. However, it’s possible that an interim announcement could be made by the chancellor or this could feature in the planned Spending Review on 25 November.
The impact of the change in allowance rates will depend on what level of equipment spending you have planned and those that are only spending more modest amounts are unlikely to be affected at all. However, the rules on both the timing and the point at which the tax relief can be claimed are complex and you should take advice from your Old Mill adviser if you have any queries.
Less than six months to review your Inheritance Tax
Current Inheritance Tax (IHT) rules can be beneficial for those working in the agricultural industry and many farmers feel confident that their farming business and property assets could be passed down to the next generation free of tax on death.
However, an independent advisory group to the government, the Office of Tax Simplification (OTS), outlined a few recommendations in their recent IHT review (July 2019).
The recommendations, while primarily geared towards making the administration of IHT more straightforward, may have a secondary effect of reducing some of the favourable reliefs available to farmers.
The next opportunity for the government to review our current tax regime and implement changes, will be the Spring Statement next year. This means that farmers have less than six months to review their own tax situation before any spring announcements.
We have produced a full article containing our advice on managing your assets in preparation for the coming changes, just click the image below to read more.