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.

Budget 2014: Important Changes

There are a number of items in the recent Budget that are important for farming businesses and landowners. However, we have identified these 2 points as particularly significant in some cases:

  • There will be an increase in the maximum amount of Annual Investment Allowance to £500,000 from April 2014 to 31 December 2015, after which it will return to £25,000. This means that you will get 100% tax relief on the first £500,000 of expenditure on Plant and Machinery. This could be very significant if you are thinking of building new Silage Clamps or Slurry Store facilities.
  • If your home is owned by a limited company and is worth more than £500,000 there is a risk you may have to pay extra taxes. In many cases this will not apply if you are running a farm business but it is important to check.

For more general information on the Budget please follow this link to our Budget Report: Green & Co Budget Summary 2014

If you are interested in the tax allowances for 2014/15, please refer to our Tax Tables: Green & Co 2014/15 Tax Tables

Please contact us if you need more information on these changes, or any other matter.

Giving at Christmas – Inheritance Tax Allowances & Exemptions

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Christmas is a time for giving…and most people are very happy if you give them money! However, it is worth remembering your allowances and exemptions for Inheritance Tax.

If your estate is worth more than the Inheritance Tax threshold – £325,000 for the 2013-14 tax year – there are some important Inheritance Tax exemptions that allow you to make gifts to others and not have to pay tax on them when you die:

Annual exemption 

You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don’t use it in that year, the carried-over exemption expires.

In addition to the annual exemption there are other exemptions for certain types of gifts. These are explained below.

Small gifts 

You can make small gifts up to the value of £250 to as many individuals as you like in any one tax year. However, you can’t give more than £250 and claim that the first £250 is a small gift. If you give an amount greater than £250 the exemption is lost altogether.

You also can’t use your small gifts allowance together with any other exemption when giving to the same person.

Regular gifts or payments that are part of your normal expenditure 

Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.

These include:

  • monthly or other regular payments to someone
  • regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
  • regular premiums on a life insurance policy – for you or someone else

You can also make exempt maintenance payments to:

  • your husband, wife or civil partner
  • your ex-spouse or former civil partner
  • relatives who are dependent on you because of old age or infirmity
  • your children, including adopted children and step-children, who are under 18 or in full-time education

Exempt gifts

Some gifts made during your lifetime are exempt from Inheritance Tax because of the type of gift or the reason for making it:

Wedding gifts/civil partnership ceremony gifts

Wedding or civil partnership ceremony gifts are exempt from Inheritance Tax, subject to certain limits:

  • parents can each give cash or gifts worth £5,000
  • grandparents and great grandparents can each give cash or gifts worth £2,500
  • anyone else can give cash or gifts worth £1,000
  • You have to make the gift – or promise to make it – on, or shortly before, the date of the wedding or civil partnership ceremony. If the ceremony is called off and you still make the gift, or if you make the gift after the ceremony without having promised it first, this exemption won’t apply.

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

Article written by guest blogger, Andrew Tucker, Financial Planning Solutions Ltd