Tax Allowances for Caravans Used in the Business

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You can claim tax relief, known as capital allowances, for plant and machinery that you keep to use in your business. Assuming all criteria are met, the cost of items such as tools, equipment, desks and computers can be offset against profits in the year in which they are incurred. This is subject to the annual investment allowance which is currently £200,000.

You cannot however claim capital allowances for assets in or on which the business is carried out. This includes land, buildings and other related structures.

This distinction is important when determining whether capital allowances are available for something such as a caravan. Although a caravan would typically be considered an asset in which the business is carried out, if it is intended to be moved around in the course of the qualifying activity then there may be an opportunity to claim capital allowances. HMRC guidance, however, focuses on caravan sites so there is some ambiguity with regard to the use of caravans in other trades.

Somewhat by contrast, farmers can claim tax relief on a caravan used to house a farm employee, even if it occupies a fixed site and is used solely for residential purposes (which could make for a few happy campers). However, if you are going to make such a claim, it is advisable to check  with your tax advisors beforehand in regard to your specific circumstances.

If you have any questions or comments please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

Tax Allowances on the Farm

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Certain plant and machinery can qualify for what’s known as Annual Investment Allowance (AIA), which allows businesses to claim for the cost of the new asset (up the specified threshold) in the year of purchase.

The current Annual Investment Allowance is £200,000 (in the year to 31 December 2015 the limit was £500,000) and it’s expected to stay at that level under the current Government. Plant and machinery that doesn’t qualify for AIAs can have writing down tax allowances of 18% or 8% (current year rates).

HMRC have accepted that silage clamps and slurry pits qualify as plant and machinery, which is of particular importance to farmers due to the Nitrate Vulnerable Zone Legislation.

There are many intricacies within this area of tax so it’s good practice to check with your tax adviser whether new assets or work qualify as plant and machinery in order to maximise AIAs.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Looking To Construct Or Extend Your Farm Building?

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If you are buying a new piece of equipment for your farm, it is important to consider whether your existing building is large enough to house it, and if not, whether a new building is required or if the building can be extended. Before undertaking a building project you should consider what tax reliefs are available, as this could potentially reduce the overall cost of the project.

It is possible to claim for alterations to farm buildings providing that they were integral to the installation of the plant, for example, housing a new bulk tank. In order for a building alteration to qualify as part of the installation costs of plant and machinery, it must remain identifiable as a separate structure from the building. It is important to obtain invoices from contractors and suppliers for the separate elements of the work.

The plant and machinery itself may qualify for capital allowances and 100% tax relief up to £500,000 per annum (between 1 April 2014 and 31 December 2015), and any balance remaining will qualify for writing down allowance at 18% per annum on a reducing balance basis.

Furthermore, integral features included in the construction can also qualify for the annual investment allowance (AIA), or, if that is fully utilised, an 8% writing down allowance per annum. Integral features are those such as: an electrical system (including lighting system), a cold water system, a space or water heating system, a powered system air ventilation, external solar shading etc.

Any energy saving equipment that is purchased is likely to qualify for 100% AIA along with the costs of installation. See here for a full list of items that qualify.

If you are thinking of constructing a new building associated with your farm or extending an existing farm building(s) please contact Green & Co for further help and advice.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.