THE rural economy is a staple part of Aberdeenshire’s heritage. Michael Fotheringham CA, a partner at James Milne Chartered Accountants, looks back on what has been a tumultuous year for farming and the prospects facing the industry in the years ahead.
A lot has been thrown at the UK farming industry in the last year. Poor weather combined with the impact of the pandemic have, for some farmers, brought increased hardship and lower incomes. As the industry starts to recover, another set of challenges lie in wait: inflationary pressures, labour shortages and uncertainty surrounding Brexit and future trade deals.
While this year’s harvest was disrupted by rain, yields have held up well, matched largely by contract and spot prices and farmers and growers will be looking forward to 2022 with more optimism.
Cattle and lamb prices have maintained higher than normal levels seen since the spring, which it is thought, is being driven by reduced import levels from the EU; a positive outcome of Brexit possibly. Whilst this suits the breeders, those looking for grazing/store livestock have found markets tougher to fulfil their usual annual requirements.
Farmers and growers planning to invest in new plant and equipment may wish to capitalise on the news that the Annual Investment Allowance (AIA) is to be (again) temporarily extended from £200,000 to £1,000,000 for qualifying expenditure from 1 January 2022 to 31 March 2023. Being able to claim 100% tax relief on qualifying plant and machinery should encourage investment. This is a continuation of the previous allowance that was due to be reduced back to £200,000 from 1st January 2022.
Farmers investing in green property improvements can take advantage of incentives offered by the new Green Investment Relief to invest in green tech such as solar panels.
Other Autumn budget measures saw a change to Capital Gains Tax, extending the time to report and pay tax due on gains from residential property from 30 days to 60 days. It was feared that Capital Gains Tax would be aligned to Income Tax. Those fears were unfounded with no change for those who benefit from Agricultural and Business Property Relief.
This means financial gains from farmland or certain business property and assets are exempted on death, allowing families to leave these assets to the next generation with a reduced or eliminated inheritance tax bill.
This is a complex subject where it is always worth seeking professional advice as HMRC will take great care examining claims and working businesses should not lose out on the relief they may be entitled to.
On wages, the Agricultural Wages Order will be affected by change to the national living wage paid to workers aged 23 and above, which is to increase from £8.91 an hour to £9.50 an hour from April 2022. The national minimum wage for workers under 23 and apprentices will also rise.
Recovery will take time but there are signs of green shoots despite rising costs. Beef and lamb prices remain high while forward contract prices for 2022 harvest are already looking healthy. And we all hope the pandemic will finally be brought under control and, of course, the weather is kinder next year. That would make such a difference.
James Milne Chartered Accountants has been serving the rural economy in north-east Scotland since 1888. For more information, contact www.jamesmilne.co.uk or call 01224 584458, 01467 623311 or 01330 828500.