Can I claim tax relief against my profits when milk quota is abolished?

On 1 April 2015 the European quota system that has limited all milk production for 30 years will be abolished.


For many farmers who have bought milk quota and who operate as a sole trader or partnership, the scrapping of milk quotas will give rise to a capital gains tax loss.


It will be possible to make use of this loss and set it against the tax bill on capital gains made elsewhere.  It is not possible to offset this loss against income tax.


Farmers are still disposing of farmland at a taxable gain.  For example, the sale of small parcels of land, barns for development, farmland with low base cost and general restructuring are resulting in potential capital gains which can be reduced by the capital loss on milk quota.


In fact, as farmland continues to rise in value, with prices of £10,000 per acre in some areas of the country, the loss will be a useful relief for many.


Entrepreneurs’ Relief only applies to a ‘material disposal of business assets’ and so with a possible 28% rate of capital gains tax, the capital loss on the milk quota can be offset against other gains.


The potential utilisation of the loss claim on milk quota must not be overlooked when realising capital gains.  Please get in touch with us if you have any questions about how milk quota should be dealt with in your accounts and how you can use the capital loss to your advantage.