Tax implications for restructuring compensation
Payments of sugar restructuring compensation are to be made in June 2009 and February 2010
The sugar restructuring compensation, paid as a result of the processor relinquishing 13.5% of the UK sugar quota, is due to be paid to eligible beet growers in June 2009 and February 2010.
While you are recommended to seek independent advice, it is expected the payments will treated on the same lines as the industry restructuring compensation paid in 2006 following two factory closures, and the permanent transfer scheme in 2001.
Income taxes
• In 2001, British Sugar and the NFU announced a one off scheme that allowed sugar beet growers to relinquish all or part of their Contract Tonneage Entitlement ("CTE"). HMRC were asked about the taxation consequences for farmers who sell or buy CTE. HMRC's view was that the transactions were on revenue account, with the result that amounts received were taxable receipts of the trade and amounts paid were deductible in computing trading profits.
• We have not obtained from HMRC any ruling in relation to the current restructuring, but we can see no reason why HMRC should revise their earlier interpretation in respect of the current proposed payments to be made by the RPA direct to growers under the restructuring package.
• The income from relinquished CTE should be recognised on the day of receipt.
Disclaimer
Whilst every reasonable effort has been made to ensure the accuracy at the date of publication of the information and comment provided in this document, no representation is made as to its correctness or completeness and no responsibility or liability is assumed for errors or omissions. This document is intended for general information only and does not constitute legal or professional advice.
