Employer obligations for farming and rural businesses

Chris Campbell

Chris Campbell

Tax Senior Manager

As the current tax year progresses, the impact of recent changes to the National Minimum and Living Wages (which came into effect from 1 April), is no doubt being felt across all industry sectors.

Along with employers in other sectors, farming businesses will have been affected by these changes.  The National Living Wage for employees aged 25 and over increased from £7.50 per hour to £7.83 per hour.  The National Minimum Wage also increased for younger employees, from £7.05 to £7.38 per hour for employees aged between 21 and 24, from £5.60 to £5.90 per hour for employees aged between 18 and 20 and from £4.05 to £4.20 per hour for employees aged under 18.  The apprentice rate changes from £3.50 to £3.70 per hour.

For employees deemed to be agricultural workers, the new minimum rate of pay is £7.83 per hour plus £1.20 per hour for those holding a relevant qualification. The rate of pay for apprentices is £5 per hour.

Pension Obligations

Most farming businesses will be aware of their obligations in terms of the automatic enrolment of eligible employees into a Workplace Pension scheme.  This has been phased in since October 2012, however by February of this year all employers will have reached their staging date and undertaken the required duties.  The requirements will therefore now be relevant for all farming businesses, regardless of their size or number of employees.

According to the Pension Regulator, most schemes were set up on the Qualifying Earnings basis and the Regulator has been writing to all employers to remind them of the increase from 6 April 2018 and then the further increase from 6 April 2019.   Whilst there would normally have been an initial minimum total pension contribution to be paid of 2% per annum, this increased to 5% from 6 April 2018 and will increase again to 8% from 6 April 2019. 

These increases may have an impact on the profitability and cash flow of farming businesses, so farmers should be mindful of the applicable rates when making recruitment decisions or increasing the salaries of existing employees.  As farming businesses often employ seasonal workers such as harvest casuals, it is essential to ensure that the rules are being correctly applied for all workers, as the penalties for non-compliance can be significant.

Expenses and Benefits in Kind

Following tax year-end, farming employers who provide benefits in kind to their employees or pay business expenses to or on behalf of employees will need to consider any obligations to complete Forms P11D.  In the past, Forms P11D were only required for directors and employees earning at a rate of above £8,500.  However, this has been extended to all directors and employees since April 2016.

The deadline for the submission of Forms P11D for the 2017/18 tax year is 6 July 2018. Class 1A National Insurance on benefits in kind is payable at 13.8% and the due date is 19 July 2018 (20 July 2018 if paid electronically as the usual date of 22 July 2018 falls at the weekend).

Whilst many farming businesses will employ workers who are in tied accommodation which may qualify for the job-related accommodation exemption, there may be other cases where benefits in kind are taxable – this could include where an employee or director has their utility or telephone bills paid, is provided with private medical insurance or is provided a loan or the use of a company owned vehicle or asset.  Benefits in kind must normally be reported on Forms P11D, along with any business expenses which are not exempt.

Special rules apply in the case where benefits in kind are being charged to tax via the payroll and also for minor items which may qualify for the trivial benefits exemption.

If you are unsure about how your farming business could be affected, it is important to seek professional advice at the earliest opportunity.