THE Budget is a tale of two halves for Northumberland farmers trading as companies, according to a leading accountancy firm.

Armstrong Watson, which has a base in Hexham, commented that, on one hand, the headline rates of Corporation Tax have been increased, but on other there was the announcement of a Super Deduction for companies.

During the Budget, Chancellor Rishi Sunak announced Corporation Tax would rise to 25 per cent in 2023, up from 19 per cent for businesses with profits over £250,000 for businesses operating within a limited company. He is also creating a Small Profits Rate to ensure only businesses with profits over £250,000 will be taxed at the 25 per cent rate – 10 per cent of all companies will pay the full higher rate – while those with profits of £50,000 or less will continue to pay 19 per cent. There will be a tapered rate for companies with profits between £50,000 and £250,000.

Commenting on how farm businesses will be affected, Armstrong Watson partner and head of agriculture, Andrew Robinson, said: “The increase in Corporation Tax did not come as a surprise as it had been widely leaked. The new 25 per cent main rate only applies to profits in excess of £250,000 so many farming companies will continue to pay lower rates than unincorporated businesses. The much-anticipated increases in Capital Gains Tax did not materialise, and it is likely that a further announcement or consultation document will be released later in the month.

“The predictions of revenues from both Capital Gains Tax and Inheritance Tax over the next five years show modest increases. This does not suggest major changes which will impact on agriculture.”

Meanwhile a new Super Deduction will see companies who invest in qualifying plant and machinery, from April 1 2021 to March 2023, benefit from a 130 per cent capital tax allowance, meaning their tax bill is cut by up to 25p for every £1 they invest.

However, Mr Robinson added: "The new proposed Super Deduction is again discriminatory against any businesses operating as partnerships or sole traders. It is just the same as the Research and Development tax credit situation which is only available to companies. There are many partnerships and family businesses that are investing in these projects and structures that should also get the tax benefits.”

Meanwhile, NFU President Minette Batters said: “The support offered to businesses by the government throughout the pandemic has been incredibly important in keeping many viable over the past year. In the longer erm, farm businesses can play a key role in the investment-led recovery that the Chancellor has set out today. With an ambition to reach net zero by 2040, British farming can be a pivotal part of meeting our climate ambitions and increasing productivity."

However, she said she was disappointed that the Super Deduction on machinery investment was only applicable to limited companies and not available to all businesses.