Making the Numbers Add Up.

In the same way that soft fruit production and - in particular - strawberry growing has become a very specialised industry Chavereys was created as a specialist firm nearly five years ago out of a large provincial practice of Chartered Accountants. Our aim is to provide a specialist advisory service to the Agricultural and Horticultural Industries.

The 21st century continues to bring fresh challenges and opportunities - despite the financial pressures on the industry. Advising the specialist fruit grower is today as stimiulating as it has ever been.

We are currently reviewing the structure of the business of each of our horticultural clients to see that it is appropriate for their needs. The benefits of operating as a sole trader or partnership have been eroded and today many businesses will pay less tax and national insurance contributions on their income if they trade as a Limited company. The decision to incorporate is far from straight forward and the savings in tax on income have to be compared with the increased administrative costs and the lack of flexibility in the corporate structure.

The Uk has a tax environment which favours the realisation of capital gains and encourages the creating and maintenance of wealth wihin a business structure.

The introduction of business asset taper relief which can exempt up to 75% of realise gains from tax means that land can be sold for residential development at a tax cost of 10% of the gain realised. The rules surrounding this tax benefit are complex and contain many traps for the unwary. For the tax advisor they do, of course, create both the need for a detailed study of legislation and the opportunity to generate fees.

Agricultural and horticultural land attract generous reliefs that enable Inheritance tax to be avoided on the death of the owners of farming assets. This contrasts with the 40% inheritance tax charge that would be levied if the deceased's wealth is held in non business assets such as hosues and shares. The Inland Revenue have recently had to acknowledge that a six bedroom 16th century house surrounded by 126 acres of land which has generated a loss for the last 6 years is nonetheless a part of a working farm and therefore exempt from Inheritance tax.

Some of our work involves assisting businesses to obtain EU funding. One of the most beneficial recent developments has been the accessibility of Eu funding for developing intensive fruit enterprises via the EU Fruit & Veg Regime. Those selling through producer Organisations are paying their levies and for every £1 sterling paid to the PO they are getting the benefit os £2 of improvement expenditure - often on their farm. The growers get the benefit of the capital expenditure and yet many treat their PO levies as a revenue deduction in their accounts. Whilst this may need to be explained to a bank manager concerned about high levels of marketing costs; this accounting treatment could come under close scrutiny in an investigation by the Inland Revenue.

There is a great deal of scope for a discussion with an accountant specialising in the horticultural sector.

Spring 2003