Mike Butler, a partner at accountants and business advisers PKF Francis Clark said farmers should prioritise making a claim for lost income before Government support is withdrawn. Some profitable farmers may not have this on their radar because they mistakenly think they aren’t eligible.
The Coronavirus Self-employment Income Support Scheme is among a range of unprecedented measures brought in by the Government as the UK economy faces the severest quarterly fall in output, by up to 35 per cent, since records began in 1908.
Mike said, “Most farmers are now beginning to realise the adverse implications to their businesses in the form of lost income due to coronavirus.
“For those businesses operating as sole traders or partnerships, farmers should not ignore assessing whether a claim under this scheme is appropriate for them.
“Whilst there is an immediate concern and the beginnings of cash flow pressures, it is almost certainly going to be over the next 12 months that issues really begin to cut deep.”
Mike, part of PKF Francis Clark’s rural and agri specialist team, added, “We have seen impact on the red meat supply chain feeding back down to farmers with significant decreases in farm gate prices and the same issues are facing the dairy sector.
“Indeed, the disruption to the supply chain and the loss of wholesale and catering markets is leading to disruption across the board including poultry, fish and vegetables, as well as dairy and red meat.”
Farmers should already be talking to their accountant to understand whether they are eligible to benefit from the scheme for self-employed, in anticipation that the scheme itself will be up and running by mid-May.
Payments are due to be made by early June, according to recent guidance issued by HMRC.
Mike explained: “There are a number of criteria that need to be fulfilled for the self-employed to be eligible and principally claimants should have lost trading profits due to coronavirus.
“However, importantly, businesses do not need to have ceased as a result of coronavirus but do have to have been adversely affected. Therefore farmers that are still operational can consider making a claim.
“There is no definition of the amount by which your business must have been affected for you to be eligible under this scheme.
“Clearly, with the immense financial burden being placed on the country from the various coronavirus schemes, one would anticipate that all those that benefit, be they farmers, individuals or any business, would assess the impact on their own position before readily making a claim or taking a payment, taking into account the spirit and the purpose of this scheme.”
Those who are successful under the scheme will be able to receive 80 per cent of the average declared taxable profits for the three years up to 5 April 2019, up to a maximum cap of £2,500 per month.
In addition there is a requirement that those eligible must not have reported profits in excess of £50,000 to be eligible for claims, Mike pointed out.
That threshold can either be based on the 2018/19 tax year alone or the average of the three tax years up to 5 April 2019.
However the claim itself is based on the average of the three years to 5 April 2019 with the appropriate 80 per cent applied to the average profits across that three year period.
With farmers, where a farmer’s averaging has been applied to those three reference years, the assessment for the self-employment income support scheme is taken from the pre-averaged taxable profits.
Mike added, “It is likely you will need to liaise with your accountant now to understand if you are eligible and be ready to make such a claim as and when HMRC move this process forward. You are also likely to want to ask your accountant if any amounts awarded are correctly calculated.
“At the moment we are expecting HMRC will make contact with taxpayers direct but in the meantime we strongly advise that farmers do assess their eligibility to ensure that they don’t miss out on this scheme where they feel support is needed.”
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