The Home-Grown Cereals Authority levy rates payable by cereal and oilseed growers and cereal dealers and processors are to remain the same as last year.

An Order laid before Parliament on 27 May 2004 set the levy rates that will apply from 1 July 2004 to 30 June 2005.

The detailed rates with effect from 1 July 2004 are:
* the cereal grower levy remains at 40p (plus VAT) per tonne on cereals sold into intervention by a grower directly or through an intermediary
* the cereal dealer levy remains at 43.3p (plus VAT) per tonne of cereals purchased direct from growers (this figure includes a sum equal to the cereal grower contribution of 40p (plus VAT)
* the standard rate cereal processor levy remains at 8.25p (plus VAT) per tonne on cereals sold and delivered to cereal processors other than animal feed processors
* the reduced rate cereal processor levy remains at 4p (plus VAT) per tonne on cereals sold and delivered to animal feed processors
* the oilseed grower levy remains at 65p (plus VAT) per tonne on oilseeds sold by growers

HGCA Levy Scheme rules require that liability for payment of levy arises when property in the cereals and oilseeds passes to the purchaser. In all cases the purchaser is required by the terms of the Levy Scheme to register with the HGCA and collect the levy. These rules apply to all buyers, including other farmers purchasing directly as an alternative to buying from a dealer or merchant. In all cases, the buyer is legally required to register with HGCA and to collect the cereal levy.

BACKGROUND

1. The Home-Grown Cereals Authority (HGCA) was established under the Cereals Marketing Act 1965. The 1965 Act, as amended by the Agriculture Act 1986, gave the HGCA responsibility for improving the production and marketing of home-grown cereals.

2. The cereals levy is imposed under the Home-Grown Cereals Authority Levy Scheme (Approval) Order 1987, as amended, and the oilseeds levy is imposed under the Home-Grown Cereals Authority Levy Scheme
(Approval) Order 1990.

3. The new Order is the Home-Grown Cereals Authority (Rate of Levy) Order 2004 (SI 2004/1445). The rates approved are as recommended by the HGCA following discussion with its stakeholders.

4. Levy paid by cereal growers, dealers and processors to the Authority for funding R&D, market intelligence, development of cereals exports and expansion of markets for cereals based food and drink is expected to raise £8,258,000 (net of VAT). Levy paid by oilseed growers for funding oilseeds R&D and market intelligence is expected to raise £1,105,000 (net of VAT).

5. Both cereal and oilseed levies are subject to VAT. The rates of levy specified in the Order laid before the Westminster Parliament on
27 May 2004 therefore includes VAT at 17.5%. VAT will be chargeable by dealers on levy collected from growers. Similarly the HGCA will charge dealers and processors VAT when invoicing for the levy is due.
VAT-registered businesses will be able to recover their input tax subject to normal VAT rules.

6. The basic rules for a grower selling cereals to a buyer are:
* The buyer accounts to HGCA for a levy of 43.3p per tonne.
* The buyer recovers 40p per tonne from the grower by deduction from the amount paid to the grower for the cereals.
* The buyer deducts a collection charge of five per cent from the total amount of levy and pays the balance of 95% to HGCA.
These rules apply to all buyers, including other farmers and processors purchasing directly as an alternative to buying from a dealer or merchant. In all cases, the buyer is legally required to register with HGCA and to collect the cereal levy.