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After a long wait HM Revenue and Customs have finally issued their guidance relating to the tax treatment of the losses sustained by dairy farmers supplying DFOB. Unfortunately most of them will not feel that the wait has been worthwhile.
Rob Hitch, partner with Dodd & Co Chartered Accountants comments ‘Farmers have been awaiting the Revenues view on the treatment of their losses and the guidance issued today will come as a blow to them. For those ex DFOB members who held loan stock there will be no losses as the loans were Qualifying Corporate Bonds, on which losses are not taxable. For current members and some who have recently left the news is more disappointing. Capital accounts which would have qualified for capital gains tax relief under the loans to traders rules, were converted to shares in the debt for equity swap on 27th March. The outcome of this is that the Revenue are seeking to disallow the loss on the shares, and as the loan was deemed to be repaid in full, no loss accrues on the loan.’
The effect of this is that tax relief, which might have returned £10 million to members has been denied. Whilst the rules covering companies will allow some relief for those trading through a company, the majority of members would have been sole traders and partnerships, who will lose the relief. Given the scale of the losses it is not inconceivable that this position will be challenged.
Details can be found in the HMRC bulletin at http://www.hmrc.gov.uk/briefs/cgt/brief0110.htm
Notes
- For further information contact Rob Hitch on 01228 530913 or rob@doddaccountants.co.uk
- Dairy Farmers of Britain (DFOB) was a farmer owned cooperative which collapsed last June.
- Dodd & Co specialise in dealing with farmers and look after many dairy farmers in the North affected by the collapse of DFOB.
- Rob Hitch is a partner with Dodd & Co, for further information visit www.doddaccountants.co.uk
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