Farmers must act quickly to reduce 31 January tax bills

Farmers are being urged to act quickly if they want to cut their 31 January tax bill.

They can do this by reducing payments on account or asking HMRC if they can defer payment until the arrival of their 2015 Basic Payment Scheme (BPS) support.

Mike Butler, director of rural services at accountants Old Mill, said thousands of farmers were still waiting for their BPS money, which was putting tremendous pressure on farm cashflows.

Many businesses would have a tax bill to pay before the end of January, whether they were sole traders or partners, or limited companies with a March 2015 year-end, he said.

“On the whole, trading results were reasonably firm in 2014-15, so many farmers will have tax to pay despite the current downturn in revenues.”

To minimise the tax due, farmers could revisit their self-assessment returns and reduce payments on account for 2015-16 to reflect lower commodity prices, he added.

According to HMRC, this can be done by either logging into a farmer’s online account and clicking “Reduce payments on account” or sending a SA303 form to the tax office.

See also: Farmers given choice between two and five-year tax averaging

Payments on account can be reduced at any time up to 31 January after the end of the tax year concerned.

No particular evidence is required, but there must be a genuine belief that the tax liability will be lower.

“There may also be the potential to recover any tax due for the previous year, whether through farmer’s averaging or other means, so it’s vital you act now to get plans in place before the 31 March or 5 April year-end,” added Mr Butler.

While there is no automatic right for farmers to ask for their tax bill to be delayed until their BPS arrives, Mr Butler said he thought HMRC should consider concessionary measures.

“There is no automatic right to set off, but there is certainly scope to contact HMRC to explain the situation and come to an agreement regarding tax payment terms,” he said.

“Seeking this kind of clarity in advance should help avoid potential late-payment penalties. Although paying interest may seem regrettable, HMRC’s rates are not materially dissimilar to bank lending rates, so many businesses may look to take advantage of any such opportunities now.”

However, farmers should act fast, if they wanted to pursue this option.

“Contact HMRC now to arrange payment terms – that way you can budget ahead and avoid the risk of late-payment penalties,” added Mr Butler.

Can you get more time?

• HMRC helps businesses with cashflow problems by offering “time to pay” arrangements
• HMRC must be satisfied that people are genuinely unable to pay their tax on time and not just that they would prefer not to pay it
• Applicants are encouraged to apply in advance of their tax becoming due
• Generally, people are asked to pay monthly instalments instead
• If put in place, it should avoid farmers having to pay a 5% surcharge if they haven’t paid their tax bill by 28 February

Read more information about time to pay arrangements (PDF)