Over the last few years Murray Smith has been helping farming clients to save tax by setting up limited companies which run alongside a farming partnership. This structure allows some profits to be taxed at corporate rates of 20% compared to a possible 40%.
This approach has saved certain clients considerable amounts of tax each year.
Going forward the Chancellor has now introduced a new dividend tax regime which means that it will become more expensive to take cash out of limited companies. The use of a company in your overall business structure will continue to provide many opportunities for tax savings but you will need bespoke advice to make the most of the opportunities.
In addition to sheltering profits in a limited company some farmers should seriously consider the use of Self Invested Pension Plans (“SIPPs”) to build up cash, land and other investments in a tax free environment.