BUDGET COULD LEAD TO TAX SAVINGS FOR AGRICULTURAL BUSINESSES
Changes to Investment Allowances announced in Monday’s Budget could lead to big tax savings for agricultural businesses – but timing is critical, according to a leading accountant specialising in the sector.
Ryan Lincoln, partner at chartered accountants, business advisers and financial planners Lovewell Blake, welcomed the sizeable increase in the Annual Investment Allowance (AIA) from £20,000 to £1 million for all qualifying plant and machinery announced by Chancellor Philip Hammond in his Budget statement.
However, with the new allowance coming in on 1st January, businesses planning investments in their current financial year need to plan carefully to take full advantage.
“The increased allowance doesn’t mean that every business will suddenly be free to spend £1 million on day one,” said Mr Lincoln. “For example, a farm with an accounting year other than December which therefore spans the rate change will fall into the transitional rules.
“So if they are planning a big investment, the timing of this is critical to maximise the relief on the initial expenditure. They might be better off delaying the acquisition, when they will have the full £1 million available? As ever, good quality advice is very important.”
Many farm businesses will also welcome the announcement of a new capital allowance for ‘non-residential structures and buildings’, which will include many agricultural buildings. The new rules will allow such structures to be written off against tax over a period of 50 years; the allowance will also be available for extensions to existing qualifying buildings. The new allowance is effective immediately, for contracts entered into on or after 29th October.
“Generally the Budget was positive for the farming sector, with no banner announcements, but a few measures which are advantageous – and no nasty shocks!” said Mr Lincoln.