Budget Analysis - What does it mean for rural business? - Philip Bowern
Number 10 Flickr: Chancellor of the Exchequer Jeremy Hunt unveils the Budget to parliament. 10 Downing Street. Picture by Simon Walker / No 10 Downing Street
The scrapping of tax relief worth an estimated £300m a year to holiday homeowners who let their properties and the extension of Agricultural Property Relief (APR) to cover environmental projects are two announcements in the Spring Budget that will impact rural businesses.
The CLA had lobbied hard for APR to be extended to environmental land management, warning that the lack of clarity on the tax position was acting as a barrier to some landowners moving from agriculture into green initiatives to benefit the environment.
The Government has been consulting on the proposed change and Chancellor Jeremy Hunt confirmed in his spring Budget that he would amend the tax regime to ensure farmers and landowners diversifying from agriculture into environmental land management would not be disadvantaged.
The CLA says the scope of the extended relief is “reasonably broad.” The Treasury said it will cover “land managed under an environmental agreement with or on behalf of the UK Government, devolved administrations, public bodies, local authorities or approved responsible bodies.”
Land must have been classed as agricultural for at least two years before the change and the new rules come into force in April next year. The CLA described the announcement as a ‘win’ for rural businesses.
Jason Beedell, Rural Research Director at Strutt and Parker, said the move would give confidence to farmers and landowners that they could enter long-term environmental projects, including habitat creation, climate mitigation and flood management, without being “unfairly penalised.” He added: “It will give them greater flexibility to do more for the environment…at the same time as accessing new sources of income.”
The news for owners of holiday lets is less positive with the scrapping of a tax break that enabled second homeowners who let them to holidaymakers for a minimum of 105 days a year to deduct mortgage interest payments from their rental income for tax purposes.
The furnished letting scheme also allowed second homeowners to pay lower capital gains tax when they sold. The Chancellor scrapped the scheme telling MPs: “I am concerned this tax regime is a great distortion so there are not enough properties available for long-term rental for local people.”
The hope in rural areas must be that at least some holiday homes are restored to the housing market and either sold, boosting the housing stock, or let on a longer-term basis to tenants desperate for somewhere to live.
The mainstream headline announcements in the Budget were a 2p cut in the rate of national insurance, the freezing of duty on fuel, an increase in the threshold at which businesses must register for VAT – giving Small and Medium Sized businesses a boost - and a new, tighter, tax regime for non-doms – people who live in the UK but earn income abroad.
UK wine, spirits and cider producers will welcome the freeze on alcohol duty while a new tax break for film and TV companies, many of which use rural estates as the settings for their work, gives a boost to the creative industries, which ought to benefit the owners of the all-important locations where they film.
Other measures rural organisations had lobbied for, to boost rural business, failed to materialise, however. Calls to cut VAT for accommodation and attraction enterprises in the rural tourism sector to 12.5% seemingly fell on deaf ears.
The Budget was billed by some before the Chancellor began his speech as a pre-election giveaway, By the time he sat down after his speech it was widely described as “low key.” Speculation that we’re in for a General Election as early as May might prove to be wide of the mark.