6 January 2020
With the New Year here, now is the time to plan for 2020 and beyond.
The exceptionally wet Autumn will focus many farmers on the benefits of direct drilling, and those heading to #LAMMA20 @lammashow at the NEC, Birmingham, will be able to see the variety of new high-tech machinery available. Thankfully, the indoor venue saves you from the deep mud of past years.
Using your Annual Investment Allowance
From replacing or investing a decent mole plough to irrigate your fields, to the latest weather station, plan your investment wisely and take full advantage of the annual investment allowance (AIA) – currently the full value of an item up to £1 million until 31 December 2020. You may need to adjust that amount if your accounting period started before 1 January 2019, which would make it lower than £1 million, or if your accounting period was not a 12-month period. Some of the latest sprayers will not only give you precision farming and save you money on the amount of spray required but also reduce your tax burden and help improve the local environment.
But be aware – AIA is not available for partnerships where one of the partners is a company or another partnership.
Do not forget that if you are a sole trader or a partner and you have more than one business or trade, each business usually gets an AIA. You only get one AIA if the businesses are both controlled by the same person and are in the same premises or have similar activities. If two or more limited companies are controlled by the same person, they only get one AIA between them and they can decide to share the AIA between them.
Planning to build a grain silo?
If you are considering building a grain silo or have built a grain silo historically, you should consider the case of May v HMRC where a farmer built a facility to dry and store their grain and claimed plant and machinery allowances for the whole cost as a horizontal silo. HMRC claimed it was a barn fitted with equipment to dry out the grain and so the equipment qualified as plant and machinery (20%), the rest was a “building” (80%) and so did not qualify. The tribunal concluded that the moveable drying equipment could not function effectively without the specially designed grain store or vice versa, and so the whole amount (100%) “together constitute the apparatus” to successfully dry and store grain, and so should qualify for capital allowances. The tribunal accepted that the facility was constructed on the basis that grain would be kept for nine to ten months at most, so accepted the temporary storage nature of the structure.
Environmentally-friendly diversification
As you plan for the future, look to tap into new environmental and social markets, through the delivery of carbon sequestration, biodiversity restoration, or care farming services to improve social outcomes.
Schemes including the planting of trees can help secure future incomes along with inheritance tax planning opportunities; enabling succession plans to be implemented in a tax-efficient manner. Do not forget to research all of the grants available now and those coming soon. The new £50m Woodland Carbon Guarantee scheme is being introduced to boost tree-planting rates in England. The Government has committed to planting 11m trees by 2022, as part of its efforts to hit zero carbon emissions by 2050 to tackle climate change. Farmers under the new scheme will be able to offer to ‘sell the carbon dioxide they capture’ by growing trees in the form of verified carbon credits, called Woodland Carbon Units (WCUs), to the Government for a guaranteed price every five or ten years up to 2055/56.
We can help
If you would like to discuss your diversification plans or the tax implications for 2020, please contact me or one of our rural specialists.
