2015 Autumn Statement and Spending Review: key agriculture and rural land announcements

Practical Law UK Legal Update 2-620-2784 (Approx. 8 pages)

2015 Autumn Statement and Spending Review: key agriculture and rural land announcements

by Practical Law Agriculture & Rural Land

2015 Autumn Statement and Spending Review

On 25 November 2015, the Chancellor of the Exchequer, George Osborne, delivered the 2015 Autumn Statement and Spending Review.

This update summarises the key implications for agriculture and rural land practitioners. For an analysis of other aspects of the 2015 Autumn Statement and Spending Review, see Further reading.

Defined terms

The following defined terms are used in this update:

Autumn Statement and Spending Review 2015: HM Treasury: Spending Review and Autumn Statement 2015 (25 November 2015).
Policy Costings: HM Government: Spending Review and Autumn Statement 2015: policy costings (November 2015).

Defra budget cut by 15%

The government has announced a reduction of 15% in the budget of the Department for Environment, Food and Rural Affairs (Defra) by 2019-20. Funding for flood defences, public forests, National Parks and Areas of Outstanding Natural Beauty will be protected. (Autumn Statement and Spending Review 2015, paragraphs 2.150, 2.153 and table 2.1.)

For more information, see Defra: The Department for Environment, Food and Rural Affairs' settlement at the Spending Review 2015 (25 November 2015).

Spending on Defra science facilities and disease prevention

The government will prioritise spending on animal and plant disease prevention. It announced an investment of over £130 million capital funding in Defra's science facilities by 2020-21, including funding to enhance national outbreak response capabilities. The Centre for Environment, Fisheries and Aquaculture Science will receive £5 million funding to improve its headquarters in Lowestoft, with further consideration of its capital requirements following the completion of a five-year plan to renovate the site and further commercialise the business.

The government confirmed that it will continue to invest in implementing its 25-year strategy to eradicate bovine tuberculosis.

(Autumn Statement and Spending Review 2015, paragraphs 1.189, 2.150 and 2.152.)

National Parks

The government has announced that National Parks will be given legal flexibilities to allow them to build sustainable, long-term revenue streams and boost growth in rural areas. (Autumn Statement and Spending Review 2015, paragraph 2.153.)

Flood defence budgets

The 2015 Autumn Statement and Spending Review makes no change to the capital budget for investment in flood defences. This remains at £2.3 billion. For more details on that budget, see Legal update, Flood defence projects to receive government funding.

However Defra has agreed to achieve, over the period to April 2020, a 15% reduction in real terms in their current day to day budget. They claim that this will be generated by departmental efficiencies and that the current budget for maintenance of existing flood defences will not be cut. This suggests that the savings will largely affect other aspects of Defra’s work. No details are given of the current expenditure on flood defence maintenance.

(Autumn Statement and Spending Review 2015, paragraph 2.151.)

Single Farm Inspection Taskforce

The government has announced that Defra will set up a Single Farm Inspection Taskforce to reduce the burden of bureaucracy on farmers, aiming to cut farm inspections by 20,000 by 2019-20. (Autumn Statement and Spending Review 2015, paragraph 2.157.)

Free access to Defra data reserves

The government has confirmed that Defra will open up 8,000 datasets over the next year as part of the Public Sector Efficiency Challenge. It is hoped that this will enable citizens and businesses to make better use of data to protect the environment and drive innovation in food and farming. (Autumn Statement and Spending Review 2015, page 75.) For background information, see Legal update, Defra announces proposals to give the public free access to its data reserves.

Funding for agricultural technology centres

The government has announced the provision of funding for agricultural technology (agri-tech) centres, which will develop new engineering technologies to increase the productivity and sustainability of UK agriculture. These include the following:

£18 million for the Excellence in Precision Agriculture Innovation Centre, which will be partly headquartered in Shropshire.
£50 million for two new agri-tech centres headquartered in York.

(Autumn Statement and Spending Review 2015, paragraphs 1.255 and 1.261.)

Broadband investment

The government has stated that it will invest up to £550 million over the Parliament to make the 700Mhz spectrum band available for mobile broadband use. The government will complete the £1.7 billion investment into the superfast broadband programme to ensure it is available to 95% of premises by 2017. (Autumn Statement and Spending Review 2015, paragraph 2.103.)

The government has announced that it will explore setting up a new broadband investment fund, to support the growth of alternative network developers by providing greater access to finance. The fund would be supported by both public and private investors, and would be managed by the private sector on a commercial basis. (Autumn Statement and Spending Review 2015, paragraph 1.222.)

Averaging period for farmers to be extended to five years

The government has confirmed that the Finance Bill 2016 will include legislation extending the averaging period for self-employed farmers to five years with effect from April 2016. Farmers will be given the option to use the extended five-year averaging period or the existing two-year averaging period. (Autumn Statement and Spending Review 2015, paragraph 3.21.)

This measure was first announced in the March 2015 Budget and confirmed in the July 2015 Budget, when a consultation document was published seeking views on how the extension should be designed and implemented (see Legal updates, March 2015 Budget: key business tax announcements: Farmers: averaging period to be extended to five years and July 2015 Budget: key agriculture and rural land announcements: Averaging period for farmers to be extended to five years: consultation). A summary of responses to the consultation has not yet been published. However, as the ability for farmers to choose between averaging periods has not been previously announced, it is assumed that this measure has arisen as a result of the consultation responses.

Farmers' profit averaging is an income tax relief that enables an individual farmer to make an averaging claim where their trading income profits fluctuate from one year to the next. Under the current rules, averaging adjusts the amount taken to be the profits for two consecutive tax years to reduce the variation between them. The rules are contained in Chapter 16 of Part 2 of the Income Tax (Trading and Other Income) Act 2005.

To track progress of this measure, see Tax legislation tracker: owner-managed business: Extension of averaging period for farmers.

Property-related taxes and business rates

Annual Tax on Enveloped Dwellings (ATED)

The Annual Tax on Enveloped Dwellings (ATED) is subject to a number of reliefs that apply to certain types of genuine commercial transaction. For more information, see Practice note, Annual tax on enveloped dwellings (ATED): Reliefs.

The government has announced that it will extend these reliefs from 1 April 2016, so that they will also cover the following commercial transactions:

Equity release schemes (home reversion plans).
Property development activities.
Properties occupied by employees.

(Autumn Statement and Spending Review 2015, paragraph 3.73.)

CGT payment window

The government has announced that from April 2019, a payment on account of any Capital Gains Tax (CGT) due on the disposal of residential property must be made within 30 days of completion. Currently, CGT due on residential property is paid between 10 and 22 months after completion. This is out of step with the position for other taxpayers, such as those paying income tax through the Pay As You Earn (PAYE) system. This delay can also cause problems where a taxpayer forgets to pay, or no longer has sufficient funds to cover the tax charge.

This new measure will not affect gains on properties which qualify for Private Residence Relief (and are therefore not subject to CGT). The government will publish draft legislation for consultation in 2016.

(Autumn Statement and Spending Review 2015, paragraphs 1.290 and 3.76.)

SDLT surcharge on "additional" residential properties

The 2015 Autumn Statement and Spending Review announced various measures related to problems in housing availability.

As part of these measures, the government announced a surcharge of 3% on Stamp Duty Land Tax (SDLT) in respect of purchases of "additional residential properties", such as buy-to-let properties and second homes, with a value above £40,000. This will apply from 1 April 2016.

The additional SDLT will not be payable for caravans, mobile homes or houseboats. The surcharge will also not apply to "corporates or funds making significant investments in residential property", because of the importance of such investment to the government's housing policies. The proposal may require residential buyers to certify if the property they are acquiring will be their primary residence.

The government intends to consult on the detail of the surcharge including whether corporate entities and funds owning more than 15 residential properties should be exempt. The government has stated that it will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes is particularly acute and also to help towards increasing the affordable housing budget.

(Autumn Statement and Spending Review 2015, paragraph 3.70 and Policy Costings, page 12.)

Small Business Rates Relief

Small Business Rates Relief (SBRR) provides 50% business rates relief for eligible businesses, based on the rateable value of their premises.

For some years, SBRR has been doubled for eligible businesses occupying premises with a rateable value of £6,000 or less, meaning they have 100% relief. Businesses occupying properties with a rateable value of between £6,001 and £12,000 receive tapered relief based on that value, with the relief diminishing as the rateable value increases.

This temporary increase in the level of SBRR was due to end on 31 March 2016, but it has once again been extended and will now apply until 31 March 2017.

(Autumn Statement and Spending Review 2015, paragraph 3.74.)

Tax avoidance

GAAR penalty

The government will introduce a new penalty of 60% of the tax due to be charged in all cases successfully tackled by the general anti-abuse rule (GAAR). The government will also make small changes to the GAAR procedure to improve its ability to tackle marketed avoidance schemes. Legislation to implement this measure will be introduced in the Finance Bill 2016. (Autumn Statement and Spending Review 2015, paragraphs 1.152 and 3.84.)

Those affected are likely to be very affluent individuals or large corporates that undertake highly contrived tax avoidance. (Policy Costings, page 26.)

For more information on the GAAR, see Practice note, General anti-abuse rule (GAAR).

Entrepreneurs' relief and contrived structures

The government will consider bringing forward legislation to amend the changes made by the Finance Act 2015 to entrepreneurs' relief, in order to support businesses by ensuring that the relief is available on certain genuine commercial transactions. (Autumn Statement and Spending Review 2015, paragraph 3.92.)

Deeds of variation

Following the announcement in the March 2015 Budget, the government has confirmed that it will not introduce new restrictions on the use of deeds of variation for tax purposes, but will continue to monitor their use. (Autumn Statement and Spending Review 2015, paragraph 3.37.) For information about deeds of variation, see Practice note, After death variations: overview.

Enterprise Zones

The government aims to support growth and job creation by expanding the Enterprise Zone (EZ) programme in England. It has announced 18 new EZs (of which 15 will be in smaller towns and rural areas) and the extension of eight current EZs. This measure will be effective from April 2016.

This means that in total there will be 44 EZs in England.

The new EZs will be in the following locations:

Seven in the North.
Four in the South East.
One in the Midlands.
Two in the South West.
Four in the East.

The EZs at the following places will be extended: Cornwall Aerohub, Bath and Somer Valley, Birmingham EZ Curzon Street, Great Yarmouth and Lowestoft EZ, Humber EZ, Infinity Park, North Kent Innovation Zone and Tees Valley EZ.

The policy offers three incentives for businesses locating to EZs, and local authorities:

Business rates discount.
Local authorities are able to offer businesses located in EZs a discount up to the state aid de minimis level over a five year period. The maximum available discount is £55,000 a year, up to a total of £275,000 over five years. Businesses have to be located in an EZ by April 2022 to qualify.
Enhanced capital allowances.
Companies in designated assisted areas within EZs will be able to claim 100% enhanced capital allowances against their taxable profits. This will apply in the following EZs: Infinity Park Extension Derby, Humber EZ, M62 Corridor EZ, Luton Airport EZ, Cheshire Science Corridor EZ, Carlisle Kingsmoor Park EZ, Hillhouse Chemicals and Energy Enterprise EZ, Ceramics Valley, Cornwall Aerohub, and North East Round 2 EZ.
Business rates retention.
EZs will benefit from 100% of business rates growth retention as opposed to the usual 50%.

(Autumn Statement and Spending Review 2015, paragraphs 1.251, 2.115 and 3.13 and DCLG: The New Enterprise Zones (25 November 2015).)

Coastal Communities Fund extended to 2020-21

The government has confirmed that it will extend the Coastal Communities Fund to 2020-21. (Autumn Statement and Spending Review 2015, paragraph 2.115.)

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