Implications of farming as a limited company

QUESTION: I have heard that if I operate my farm as a company, I will be able to pay corporation tax at 12.5%, as opposed to income tax at 41%. Is this an option?

ANSWER: Yes, it is possible to operate a farming business through a company as opposed to being a sole trader. It is true to say that companies are subject to a much lower rate of tax at 12.5%. However, as we will see over the course of this week’s and next week’s articles, it’s not as simple as comparing a 12.5% corporation tax rate with income tax rates of 41%. Nonetheless, there are advantages to setting up a limited company, including the following:

* Limited liability is available.