HM Revenue and Customs Brief 48/14 - asset claims on Common Agricultural Policy reform
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Published 12 December 2014
Purpose of this Brief
This Brief explains about the effect of a negligible value
claim in relation to farmers’ Single Payment Scheme Payment Entitlement
or Milk Quota.
The tax implications of the introduction of the new farmers’
Basic Payment Scheme are not considered in this Brief. Guidance for
Basic Payment Scheme will be provided in the future.
Who needs to read this?
- any person that holds Single Payment Scheme Payment
Entitlement and/or Milk Quota that is not dealt with in the corporate
intangibles regime
- accountants and other professional representatives.
Background
The EU operates a Common Agricultural Policy (CAP) across
all EU member states. The CAP
provides schemes to subsidise farmers.
As part of CAP
reform introduced from 1 January 2005, various farming subsidy schemes
ceased and were replaced by Single Payment Scheme. As part of the
introduction of the scheme, eligible persons were allocated Single
Payment Scheme Payment Entitlement to allow them to participate in
Single Payment Scheme.
EU member states have recently agreed further CAP reform.
This includes replacing Single Payment Scheme with Basic Payment Scheme
with effect from 1 January 2015.
It has also been previously agreed that the Milk Quota system
would be phased out, ceasing to exist on 31 March 2015.
A negligible value claim
Where an asset has been entirely lost, destroyed, dissipated
or extinguished, this is treated as a disposal of the asset for Capital
Gains Tax purposes. Assuming that a gain on a disposal of the asset
would have been a chargeable gain, such a disposal will give rise to an
allowable loss.
A negligible value claim allows losses to accrue before the
asset has been entirely extinguished. More information can be found in
the Capital
Gains Tax manual on the HM Revenue and Customs (HMRC) website.
Single
Payment Scheme Payment Entitlement
HMRC’s
view is that Single Payment Scheme Payment Entitlement is an asset for
Capital Gains Tax manual purposes and so a negligible value claim in
respect of an entitlement can be made where appropriate.
Single Payment Scheme will cease on 31 December 2014 and Basic
Payment Scheme will replace it. However the position for Single Payment
Scheme PE in England differs from that in the rest of the UK:
England
In England, the choice was made to continue to use Single
Payment Scheme Payment Entitlement in Basic Payment Scheme. This means
that the Payment Entitlement will not be of negligible value and HMRC will reject
any negligible value claim made.
Northern
Ireland, Scotland and Wales
In Northern Ireland, Scotland and Wales, all Single Payment
Scheme Payment Entitlement will cease to exist on 31 December 2014. HMRC accepts
that Single Payment Scheme Payment Entitlement in Northern Ireland,
Scotland and Wales became of negligible value on 16 May 2014 because 15
May 2014 was the last day that the entitlement must have been held in
order for a person to establish that they were eligible for a payment
under Single Payment Scheme. A negligible value claim may be made to HMRC in relation
to an entitlement on or before 31 December 2014, subject to the
conditions for a valid claim being met.
A negligible value claim may specify that the disposal occurs
at an earlier time, as long as the conditions for making a valid claim
are met at the time the claim is made and at the earlier specified
time. It is not accepted that Single Payment Scheme Payment Entitlement
was of negligible value before 16 May 2014 and HMRC will reject
a claim specifying a date before then.
Milk Quota
HMRC’s
view is that each individual unit of Milk Quota should be pooled and
treated as a single asset, and that the pool is an asset for Capital
Gains Tax manual purposes. A negligible value claim in respect of the
pool of Milk Quota can be made where appropriate.
There is currently a market for trading of individual units of
Milk Quota and each individual unit of Milk Quota has a negligible
value. However, as explained above, individual units of Milk Quota
should be pooled into a single asset. Whether the pool of Milk Quota is
of negligible value may vary from case to case.
Where a pool of Milk Quota is of negligible value and the
other conditions for a valid claim are met, a negligible value claim
may be made to HMRC
on or before 31 March 2015.
A negligible value claim may specify that the disposal occurs
at an earlier time, as long as the conditions for making a valid claim
are met at the time the claim is made and at the earlier specified
time. Whether the pool of Milk Quota is of negligible value at the
earlier time specified may vary from case to case.
If there is any doubt whether a pool of Milk Quota is of
negligible value, you should seek professional advice before making a
negligible value claim to HMRC.
Position
if a negligible value claim is not made
For Single Payment Scheme Payment Entitlement in Northern
Ireland, Scotland and Wales, if a valid negligible value claim is not
made to HMRC
on or before 31 December 2014 then the subsequent loss of Single
Payment Scheme Payment Entitlement will result in an allowable capital
loss equivalent to the amount incurred by the person when the Single
Payment Scheme Payment Entitlement was acquired.
Similarly for Milk Quota, if a valid negligible value claim is
not made to HMRC
on or before 31 March 2015 then the subsequent loss of Milk Quota will
result in an allowable capital loss equivalent to the amount incurred
by the person when the Milk Quota was acquired.
If you require further information please contact the Capital
Gains Tax helpline on Telephone: 0300 200 3300.
About the Author
© Crown Copyright 2014.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2014-12-17 11:00:33 in Tax Articles
