Farmers face big tax bills
THE fall in milk prices earlier this year will not prevent dairy farmers from receiving heavy tax bills in the new year, warns a rural accountant.
Mike Butler, senior partner at Old Mill, said although cash flow and profits were already tight farmers could incur hefty tax charges in January.
This is because they had a relatively good year in 2011/12, before processors started the cuts in May.
Mr Butler said: "Accounts being produced indicate that the income for 2012 rose compared with the previous year."
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Given that HM Revenue and Customs also require six months' payment up front for the forthcoming tax year, the financial pressure is set to intensify further.
"Payments on account for each year are based on the preceding year's liability, and a higher tax bill requires the settling of the balance in the January of the following year," said Mr Butler.
"All in all it's a double whammy, precisely at a time when cash flows are at their tightest.
"But carefully examining 2011/2012 accounts and allocating costs correctly between revenue and capital can yield significant savings."