Farmers and crofters facing financial difficulty as a result of late subsidy payments are being urged to ask HM Revenue and Customs (HMRC) if they can defer their January tax bills.
Accountancy firm Old Mill has warned that although agriculture is in the doldrums, many producers are currently faced with tax bills from the 2014/15 financial year.
The firm’s director of rural services, Mike Butler, said farmers should ask HMRC to consider concessionary measures to allow producers who have not received the Basic Payment to defer their tax payments until the money arrives.
“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,” said Mr Butler. “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.”
Farmers needed to act fast and contact the tax agency ahead of the January 31 payments deadline, he added.
Meanwhile, accountancy firm Campbell Dallas has urged farmers to consider using the Debt Arrangement Scheme (DAS), which will enable a farm to repay its debts at an affordable rate while preventing creditors taking any further action.
“It is particularly applicable to those farms struggling to maintain monthly contractual payments,” said the accountancy firm’s farming specialist, Andy Ritchie.
He said although DAS was governed by the Accountant in Bankruptcy, it was not a form of insolvency.
“It allows debtors to repay their debts, in full, over an extended period of time which is dependent on their disposable income. Once the scheme is approved creditors must freeze their interest and charges and cannot take any further action as long as the monthly payments are maintained,” said Mr Ritchie.
“If circumstances change for the worse, for example, a farmer suffers ill health and is struggling to maintain payments to the scheme, a payment break of up to six months can be requested. If and when the farming industry improves and there is an increase in disposable income the farm can increase payments to reduce the term of the scheme and if it has a good year and the funds to pay debts off in full then the scheme can be settled early.”
He said if a creditor objected to the scheme, a fair and reasonable test, which is very rarely failed, would be applied by the Accountant in Bankruptcy.
“For farmers worried about their cash flow and their future, DAS is well worth considering and it could help them protect their business so they are in a position to take advantage of any upturn in their market,” said Mr Ritchie.