Preliminary thoughts on Budget 2018
Wednesday, 31 October 2018
Most of the immediate reaction to Phillip Hammond's 2018 Budget statement dwelt on the headline grabbing increase in personal allowances and the question of whether or not the Budget marked an end to austerity.
Behind these key issues lie some 281 pages of detailed explanatory notes and tables, containing a number of changes which failed to grab the headlines but which are of considerable relevance to agricultural businesses:
- There will be a temporary increase in the Annual Investment Allowance for capital expenditure for the two years starting 1 January 2019. The existing limit of £200,000 will be extended to £1m. Whilst the majority of family farming businesses have found the current limit reasonably effective, there is no doubt that those planning major capital expenditure will welcome the temporary increase and tailor their plans accordingly
- After years of lobbying by the industry and the accounting profession, a “Structures and Buildings Allowance” is to be introduced. This will apply to non-residential buildings where contracts are entered into after Budget day. The relief seems in some respects similar to the agricultural and industrial buildings allowances which were abolished in 2011. Relief will be given at a flat rate of 2% per annum for 50 years and there will be no system of balancing allowances or charges
- Other changes to capital allowances include the revision of the list of environmental enhanced capital allowance items, prior to the relief being abolished in 2020. This may reflect criticism that by the time specific assets appear on the list they have often been technically superseded
- The special writing down allowance rate, which applies to fixtures within buildings, is being reduced from 8% to 6%
- Changes to capital gains tax include a tightening of the rules on entrepreneurs' relief and restrictions of some peripheral reliefs around main residences
Commenting on the changes, Steven Rudd, Head of Farms and Landed Estates, said, "As usual the Budget contains a couple of big news items and some tinkering around perceived loopholes. However, we are delighted to see that the Chancellor has listened to industry representations on agricultural buildings. Agriculture is an enormously capital-intensive industry and it is good to see tax rules starting to reflect this with regard to commercial structures."