A HAMBLETON farmer who did some contracting work for a neighbour has been hit with a £10,000 rates bill for a shed.

And hundreds of other farmers in North Yorkshire trying to diversify could face the same penalties.

Mr Peter Ashbridge, 48, of Bridge House Farm, near Brompton, Northallerton, labelled the demand "a kick in the teeth".

The bill, from Hambleton District Council, is due to Mr Ashbridge's work on neighbouring farms with his silage-making machine. Inspectors from the Valuation Agency decided the building which houses the machine should be classed as business use - meaning he must pay business rates backdated for four years on his shed.

Farmers are usually exempt from business rates but agricultural contractors have to pay. To be exempt, the law states all of the buildings on a farm must be "occupied together with agricultural land and used solely in connection with agricultural operations on the land".

This means any farmer who shares a tractor or a combine harvester with his neighbour is classed as a contractor and is liable for business rates on the building that houses the machine. A White Paper intended to clear up the issue is being debated in Westminster. But until it becomes law, farmers will have to pay.

"They are telling us to diversify and help ourselves and when we do they come along and hit you with this," said Mr Ashbridge. "Farmers are supposed to be sharing machinery because it is so expensive. This just makes a mockery of what the government is telling us."

Under the law he can appeal against the charge, but must still pay the cash up front before he can try to claim it back. He says the demand is having a stressful effect on his family. "It is hanging over our heads and we don't know what is going to come next."

Farmers across Hambleton and North Yorkshire are facing backdated bills of up to £15,000. A group of those worst affected is to meet National Farmers' Union representatives, council bosses and local MPs William Hague and Anne MacIntosh.

Mr Peter Edmunds of Northallerton NFU said: "This is another cost for agriculture at a time when farmers' incomes are absolutely on the borderline. It is virtually closing the door on the possibility of supplementing a living through contracting. It is another nail in the coffin of agriculture."

He said the NFU was urging the district council to hold off demanding payments until the issue was resolved. "This a grey area and the line where agricultural contractors and farmers meet is very indistinct. We would urge the council to delay enforcing this regulation until this grey issue is sorted out."

Mr Dave Simpson, head of finance at Hambleton District Council, said: "What has happened recently is the Inland Revenue has had a catch-up exercise, going round agricultural contractors and issuing new assessments.

"The council is merely a collecting agent. What we are required to do is carry out instructions from the Inland Revenue that are given to us by the Valuations Office.

"By law, the district council has to issue a bill to any property that is on the rating list.