New trading and rental £1000 allowances

How to use them to a client's best tax advantage

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I have a client who owns 37 acres of farmland.  In the 2017 -18 tax year she kept sheep as a hobby on the land,  receiving RPA subsidies totalling £2983 and wayleave income of £80.

In the 2016-17 tax year I declared the RPA subsidies in the Other Income section of the Tax Return, and the wayleave income on the Land and Property pages.

I would like to take advantage of the new £1000 allowances.  It would be best for my client if I could set the £1000 allowance against the RPA income, but can that be classified as trading income?  There is no space in the boxes for a deduction unless it is included under expenses.

The same farmland is the sources of both sources of income.  Am I correct that I cannot claim an allowance for both the subsidy income and the wayleave?

 

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By Jdopus
15th Jun 2018 13:04

I'm afraid I can't comment on the treatment of wayleave and subsidy income, not being experienced with farm accounts.

I just wanted to point out that I'd advise checking whether it's worthwhile using the allowances instead of claiming actual expenses. I would imagine that keeping sheep at a low level she's probably making a tax loss which could be offset against future income. If you claim the allowances instead of claiming the loss you could be missing out on some benefit to the client.

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Replying to Jdopus:
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By chicken farmer
15th Jun 2018 13:21

But, this is described as a 'hobby' (probably the sheep are just acting as lawnmowers!) so not carried on with a view to profit etc. Personally I would be interested to know how the client can claim for the Rural Payments Agency for such an activity.

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By ireallyshouldknowthisbut
15th Jun 2018 13:51

If the wayleave is "L&P" and the subsidy "trading" then you have 2*£1k allowances

As per the previous respondent I don't do farm accounts and none of my clients have ever declared a wayleave to me.

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By fawltybasil2575
15th Jun 2018 17:21

@ jborsay (OP).

IF, and it is a HUGE "IF":-

The client is entitled to retain the RPA subsidies receivable in the 2 years to 5 April 2018 (and earlier years if applicable), and

IF (another HUGE "IF") the farming taxable profit/allowable loss (EXCLUDING the RPA monies receivable) has been/will be validly excluded from the 2016/17 and 2017/18 Tax Returns, then the £80 and £1,000 can be validly claimed for the Property Allowance and Trading Allowance, against (respectively) the Wayleave and RPA subsidies in 2017/18.

[If the Trading Allowance IS available (notwithstanding my very grave doubts as expressed below) the entry in "Other Income" on the 2017/18 Tax Return should be £1,983 (i.e. £2,983 less £1,000) with an explanatory note of the calculation of the £1,983 in the appropriate "white space"].

HOWEVER, I share the erudite "chicken farmer"'s doubts as to the entitlement to the RPA monies since, prima facie, I have doubts the client qualified as an "Active Farmer" for RPA subsidy purposes. If so qualified, then such qualification, at the very least, calls into question the exclusion of the Farming Activity from Tax Returns.

Under normal circumstances the treatment of the RPA subsidies would have simply been to include them in the Accounts for the Farming Self-Employment (NOT to treat them as a separate "Other Income" source). I cannot currently understand why such treatment should not apply in your client's case.

The two aspects [i.e. (i) the entitlement to the RPA subsidies and (ii) determining whether the Farming Activity is required to be shown on Tax Returns] of course crucially INTER-ACT.

There are several dangers here, including (i) receiving RPA monies inappropriately and (ii) Income Tax liabilities being incorrectly determined (either too high or too low).

Forgive me if you have perhaps already established that (i) the RPA monies have been validly received, and that (ii) the Farming Activity does NOT need to be shown on Tax Returns (but, as these concepts do appear to be mutually exclusive, I would recommend that you enquire further into both aspects).

Basil.

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