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.

Changes To Plant & Machinery Annual Investment Allowance

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The Annual Investment Allowance (AIA) dictates up to what amount you can deduct the full cost of qualifying plant and machinery from your taxable profits. Any expenditure incurred outside the AIA is relieved through writing down allowances.

As covered in our blog posted 27th July, from 1 January 2016 the AIA is reducing from £500,000 to £200,000, which will come as a blow to businesses spending in excess of £200,000 on qualifying plant and machinery.

The mechanics of this change are straightforward for businesses whose financial year falls in line with the calendar year; however for those who do not have a December year end, the AIA should be apportioned.

For example, a business with a 31 March 2016 year end will have an AIA of £425,000; nine twelfths of £500,000 totalling £375,000 plus three twelfths of £200,000 giving £50,000.

However, expenditure incurred from 1 January 2016 up to the accounting year end cannot exceed the proportion of AIA calculated for that period. For example; for those with a March year end,  if you are spending more than £50,000 it may be worthwhile doing so before 1 January 2016 if you want to claim for the full cost in the year of purchase. The maximum AIA for expenditure incurred from 1 January 2016 to the end of the transitional period will depend on the year end, so if in doubt check with your tax advisor.

For further information 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.

Image courtesy of franky242 at FreeDigitalPhotos.net

Poultry Sheds & Tax Relief

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As far as HM Revenue & Customs are concerned agricultural sheds and buildings are structures that do not qualify for any tax relief and this also applies to Poultry Sheds. However, there are circumstances under which you can get tax relief. This must be considered at an early stage in any Poultry Shed development.

It is possible to get tax relief on:

  • Integral fittings such as electrical and cold water systems
  • Energy saving or water conservation equipment
  • Plant and machinery in the shed
  • Moveable buildings intended to be moved in the course of the business.

If a contractor is engaged to complete the work it is very important to obtain invoices from the contractor showing the separate elements.

If the shed is moveable it is very important to be clear on the reason for needing a moveable building. This could be because it is a multi site operation or due to short term tenancies for example. You should also keep copies of all correspondence and documentation which demonstrates the intention to move the building.

This is quite a complex area but with careful planning the potential tax savings are substantial.

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

The Increasing Importance of Farm Security

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There’s never been a more important time for farmers to review their farm security as well as their insurance cover.  NFU Mutual have recently announced that rural crime in the UK rose by over 5% in 2013, costing the country as a whole around £44.5 million.   The most worrying trend is the rise in sheep rustling, which in some areas has risen by 25%.  In many cases, large numbers of animals are being taken – in some cases whole flocks – and there is concern that they will become part of the food chain, making their origins, and the thieves, untraceable.

Today’s high-tech farm tools and machinery have also been a prime target, resulting in higher value insurance claims to replace expensive kit.  However, older,  less sophisticated items of plant are also at risk, as there is a lucrative trade in shipping those items to less affluent developing countries where maintenance can be carried out with simple hand tools.  Quad bikes, farm chemicals, fuel and bale wrap are also being stolen with increased frequency.

The relative isolation of farmland means that farmers don’t enjoy the benefit of Neighbourhood Watch schemes or even nosey neighbours in the same way town dwellers do, so extra precautions need to be considered.  Thieves can often wander onto farm property unseen, particularly if there is no occupied farmhouse on the land.  The farm watchdog still has his place of course, but regular checks on padlocks, gates, barn doors and fencing should become routine.  CCTV and intruder alarms can be expensive but are fast becoming a must-have, particularly on larger holdings, as both opportunists and organized gangs target the agricultural community.

Generally speaking, farm insurers are sympathetic to claims, understanding the vulnerability of stock and assets held on farmland, but if the trend continues they may become more reluctant to pay out when they consider a farmer has not taken every precaution to secure his property from theft.  For more information on crime prevention and  support  for victims, please contact your local council or police force, who are always happy to help.

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

News From The Field – An Interview With Nick Park

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Nick Park, senior partner at Green & Co, was recently interviewed for the Summer 2014 edition of News From The Field. Read on to find out more…

What is your top tax tip for 2014/2015 and maybe beyond?
For growing farm businesses, the highest value tax tip is the 100% tax relief on up to £500,000 of expenditure on plant and machinery announced in the recent budget. The big question is, though, what might qualify as plant and machinery other than the obvious items like tractors and field machinery?

If you were in charge of the Treasury, what tax allowance would you introduce for the long-term benefit of UK agriculture?
I believe that the government should be encouraging UK agriculture to develop its infrastructure to support food and environmental security in this country. So I’d recommend that farm buildings are included as assets eligible for capital allowances, to
encourage farmers to invest in the future of food production in the UK.

What inspired you to get into agricultural accountancy, and if you had not followed that path, what would be your alternative dream career?
After studying Agriculture at Reading University, I returned home to run the family dairy farm and milk retailing business. Had I not dedicated my life to agricultural accountancy I would have been a professional rugby player and then retired from sport to become an internationally acclaimed painter!

How can UK farmers gain the most out of their relationship with their accountants?
The starting point should be fixed price agreements, so that they know exactly what services their accountant is providing and exactly how much it is going to cost. And your accountant must specialise in farms, so that they understand your goals and objectives and can compare them with similar farming businesses.

If you could start farming tomorrow, what sector would you go into and why?
My farm is mainly arable and grass keep. We also have an outdoor shooting range on the farm and a windmill (mentioned in the Doomsday Book), which is part of a restoration project. I was also recently approached by a company that wanted to drill for oil – let’s say I haven’t bought my Stetson just yet!

If you would like to read the article in its original print, please click here, and turn to page 4: News From The Field Summer 2014

Do You Want To Get Maximum Tax Relief For Your Vehicles?

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There is a significant difference, for tax purposes, in vehicles classed as cars by HMRC and those classed as commercial vehicles.

Cars with  CO2 emissions of 95 or less will attract a 100% write off in the first year, but most will only receive capital allowances of 18% each year on a reducing basis. Worse still, those cars with CO2 emissions of 131 or more will only get 8% relief. Commercial vehicles, on the other hand, are classed as plant and machinery and are therefore able to form part of the annual investment allowance (currently £500,000).

So what is a commercial vehicle? You would be forgiven for thinking that this is pretty obvious, however such is not the case! Take, for example, a double cab pick up. The definition of a car is a mechanically propelled road vehicle, other than:

  • a vehicle of a construction primarily suited for the conveyance of goods or burden of any description
  • a vehicle of a type not commonly used as private vehicles and unsuitable to be so used.

Clearly, a double cab pick up can be used to transport goods but at the same time is also commonly used as a private vehicle. So is it a car or is it a commercial vehicle classed as plant and machinery?

The fact that the Dealer’s invoice shows the vehicle to be commercial does not mean that HMRC will treat it as such. However, when all factors relating to their construction are taken into account, a number of vehicles within this category do have a predominant purpose of carrying goods or burden. Each case will depend on the facts and the exact specification.

As a general rule of thumb for double cab pick ups only, HMRC accept that if the payload exceeds 1 tonne (1,000kg) it would be classed as a van.

The other main vehicle which causes similar problems is the Landrover. Again, the construction of the vehicle will be all important – are there rear seats, windows, etc? If so, HMRC will argue that it is a car rather than a van.

Clearly, if you wish to maximise tax allowances careful thought has to be given when purchasing vehicles of this nature. Should you require any further assistance please do not hesitate to contact Green & Co.

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