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Clause 57 is a technical amendment in relation to capital gains tax roll-over relief on business assets. Essentially, it is possible to defer capital gains tax when a qualifying business asset is sold, and to reinvest the proceeds in a replacement qualifying business asset. The clause updates the list of qualifying assets following a change in the EU rules affecting one type of EU agricultural subsidy. It will ensure that farmers are not disadvantaged by changes to the EU’s agricultural subsidy scheme.
What discussions has the Minister had with farmers about the change? Will he confirm that no additional changes will be required following the changes to EU rules that have prompted the clause? How will farmers be made sufficiently familiar with the change? Will there be an additional administrative burden on farming businesses, and if so, how big does the Minister expect that burden to be?
As we have heard, clause 57 extends the list of assets that are eligible for capital gains tax roll-over relief. Roll-over relief allows capital gains tax to be deferred where the proceeds of disposing of certain qualifying assets are reinvested in new qualifying assets. That helps businesses to modernise and expand.
The list of qualifying assets has included payment entitlements under the European Union’s main agricultural subsidy scheme, the single payment scheme, since its introduction in 2005. However, under reform of the common agricultural policy, payments under the single payment scheme will cease at the end of 2014, with subsidies paid in future under a new scheme—the basic payment scheme.
The changes being made under clause 57 will include payment entitlements under the new basic payment scheme within the list of assets eligible for roll-over relief. About 11,000 farmers transfer single payment scheme entitlements each year, typically with the transfer of agricultural land, and a similar number of transfers of basic payment scheme entitlements is expected to take place. It is perhaps worth pointing out that about 8,000 farmers out of 105,000 English single payment scheme applicants transfer entitlements permanently each year in England. In Scotland the number of permanent transfers is 450 out of 19,000 applicants. In Northern Ireland and Wales it is in both cases in the region of 1,200, out of 38,000 and 16,000 respectively. Similar numbers of transfers of basic payment scheme entitlements are expected once the scheme is fully established. I hope that is helpful in informing the Committee of how many farmers will see an impact from this measure.
With regard to ensuring that farmers know about the changes, detailed discussions have not taken place with farmers. HMRC is considering the implications of the changes and will discuss them with representative bodies in future. On how a person can get basic payment scheme entitlement, in England, where entitlements are already at a flat rate in each region, existing single payment scheme entitlements will automatically become basic payment scheme entitlements on 1 January 2015. In other parts of the UK, where the value of entitlements currently varies, they will be allocated to farmers who apply to the scheme. No additional changes to the CGT rules are required in response to the EU changes to the subsidy scheme.
I hope that those points of clarification are helpful. Clause 57 can ensure that farmers are not disadvantaged by the changes to the European Union’s agricultural subsidy scheme.