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 Relief for Farmhouse Renovations

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It is very likely that at some point your farmhouse and other buildings used in the farming business will require refurbishment, and it is important to be aware that whereas some repair expenditure can be relieved in the year it’s incurred (subject to a disallowed proportion for private use of buildings), alterations and improvements cannot. This is known as capital expenditure.

Repairs carried out which simply restate the building to its original condition are typically allowable as revenue expenditure. On the contrary the cost of replacing, improving or altering an asset is normally capital expenditure and can be relieved on disposal of the asset.

These rules extend to rental properties and in addition there are rules for rental properties purchased at below market value because they require extensive work in order to be habitable.

‘Capital versus revenue’ expenditure is a highly contentious issue and many cases have gone through the courts because HM Revenue & Customs and the taxpayer have disagreed over the tax treatment.

If you have any queries about taxes and the farming business 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.

Your Redundant Farm Building could be Restricting your Inheritance Tax Relief

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Agricultural Property Relief (APR), if obtained, allows an individual to pass on agricultural property, either in their Will or during their lifetime, free of Inheritance Tax (IHT).

Business Property Relief (BPR) reduces the IHT payable on a wider class of qualifying business assets when they are left in a Will or passed on during lifetime.

In order to qualify for APR farm buildings must be occupied for the purposes of agriculture – derelict buildings will not qualify for the relief. Similarly, if the property has not been used wholly or mainly for business purposes in the two years prior to the transfer, BPR will not be secured.

It’s important for all Farmers to consider their exposure to IHT and if farm diversification is currently being pursued, i.e. alternative uses of agricultural land and buildings, then it’s wise to act sooner rather than later.

If you would like further advice on Inheritance Tax please contact Green & Co on 01633 871122.

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

Tax Relief For Expenditure On Flood Defences

www.greenandco.comThe Government will legislate in the 2015 Finance Bill to ensure that business contributions to Flood and Coastal Erosion Risk Management (FCERM) projects are tax-deductible from 1 January 2015.

The Government’s aim is to encourage private sector investment in flood resilient projects via “partnership funding schemes”. The deduction will be available to both incorporated and unincorporated businesses. The measure ensures that when a business invests in a partnership funding scheme, it can deduct its contribution from its taxable profits. The deduction will also apply to contributions of service. So if a business donates labour to a FCERM scheme the cost of the labour would be deductible.

For further information contact Green & Co

Over 55? – Review Your Pension Provision Before 5 April To Maximise Future Relief

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At present an individual can pay up to £40,000 a year into a pension fund and obtain tax relief until 75, subject to having sufficient relevant earnings against which to set the contributions. After 5 April, this will reduce to £10,000 a year in respect of money purchase pension contributions, once the individual has dipped into the pension pot and taken a flexible income payment.

However, if no income has been taken before that date, the £40,000 limit will apply until income has been taken from the fund, after which it will reduce to £10,000. The exception to this is for those over 55 before 6 April 2015 who have previously placed funds into capped draw-down even if no income has been taken. These individuals will retain the £40,000 limit as long as income withdrawals remain within the capped draw-down limit.

The reduction in the limit to £10,000 could severely limit your ability to build a significant pension fund and be costly in lost income tax or inheritance tax relief.

If you will be older than 55 at 6 April 2015 you should consider placing some pension funds into capped draw-down now. This will retain your option to access limited income (i.e. within the capped draw-down limits) from the pension after 5 April 2015 without reducing your annual allowance to £10,000. With the added advantage of flexible access and transfers to the next generation free of tax at the point of transfer, the use of pension funds for income and inheritance tax planning will increase and contributions exceeding the £10,000 limit may be needed to optimise tax planning.

Farmers for example, have volatile earnings during their pensionable years. You could have a situation where dipping into the pension to supplement income could be beneficial in leaner or loss-making years. Making pension contributions in profitable years to offset higher rate tax could be attractive but could be restricted to the £10,000 limit if action is not taken now.

Plan ahead now and make a one-off fund designation into capped draw down before 6 April and there will be no reduction in the contribution limit from £40,000 provided withdrawals from the pension fund remain at the capped draw down limits. This would provide significant tax planning advantages when otherwise dipping into your pension pot would restrict future pension contributions to £10,000 per year.

For further information contact Green & Co

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

Flood Defence Tax Relief

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In the Autumn Statement George Osborne announced that from 1 January 2015 businesses will be able to get tax relief on contributions to flood defense schemes. The detailed proposals have now been released and this relief will be important for landowners who are vulnerable to flooding and coastal erosion.

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

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.

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.

Autumn 2014 Newsletter

 

Summer will soon be coming to a close, and here is our next newsletter to usher in Autumn: Green & Co Autumn 2014 Newsletter

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This newsletter focuses on:

  • Tax advantages for innovative companies
  • Dealing with workplace disputes
  • Tax planning following changes to the treatment of trusts
  • Pensions – is now the time to make contributions?
  • Tougher lending rules for mortgage borrowers
  • Tax relief on your travel expenses

If you would like advice on any of these areas, please contact us today.

Try Not To Lose Out On Losses!

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Trading Loss relief is now limited to the higher of £50,000 or 25% of the losses made. This restriction was designed to stop clever tax avoidance schemes but can be very significant for rural businesses.

This year, a client made a capital gain of £100,000 on the sale of a barn. In the same year they built a slurry lagoon and were able to get 100% tax relief resulting in trading loss of over £100,000. In the past we could have set the trading loss against the capital gain and so there would have been no tax. However under the new rules there will be a tax cost of up to £14,000.

There are usually ways to minimise tax liabilities in these circumstance but they must be planned early. If you would like advice on minimising your tax liabilities, then please contact us.

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