Sugar beet CTE taxation treatment

The current outgoers' scheme allows sugar beet contract tonnage entitlement to be traded.

It is expected that HMRC will deem any receipts to be taxable income of the trade and any payments to be deductible in computing trading profits. This is on the basis of their published guidance in relation to payments and receipts under the 2001 outgoers' scheme. (Inland Revenue Tax Bulletin 55)

The tax treatment outlined in HMRC's guidance was based on a number of decided tax cases which showed that sums derived from the disposal of such contracts were income. In addition HMRC indicated that only in extremely exceptional cases, where the loss of entitlement destroyed the entire structure of the farming business, could a disposal ever be a capital disposal.

The timing of the deduction against profits for purchases will follow generally accepted accountancy practice. This means payments for contract tonnage entitlement are shown on the balance sheet and amortised (written off) against trading profits over the period for which they may reasonably be expected to be of value to the business.

For VAT purposes the sale of contract tonnage entitlement should attract standard-rated VAT.

NFU members can obtain free initial legal and professional from NFU CallFirst on 0870 845 8458. We would however recommend that members also discuss any proposed transactions with their professional advisers.

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