The Chancellor’s announcement to double the rate of the Annual Investment Allowance (AIA) is welcome news for agriculture, according to agricultural accountants The Fish Partnership.
George Osborne announced in his Budget that the AIA, which allows businesses to invest in new plant and machinery for tax benefits, would double from £250,000 to £500,000 until the end of 2015.
The Tory-led coalition initially cut the AIA from £100,000 to £25,000, before it was increased to £250,000 in 2012.
AIA is a kind of capital allowance, which offers tax relief at 100 per cent on qualifying expenditure in year of purchase.
Farmers and agricultural businesses can now deduct up £500,000 from taxable profits. This pro-rates for short or long term periods, and also for periods that span the operative dates and rates.Paul Laird, partner at High Wycombe-based The Fish Partnership, said: “With the £250,000 AIA allowance due to end in December, doubling of the allowance to £500,000 until the end of 2015 is welcome news for farmers.
“This should give farmers the confidence to invest in new plant and machinery, knowing that they will receive 100 per cent tax relief.
“While we would have liked the move to been made permanent, any good news should be welcomed.
“If farmers are considering making capital investments in plant and machinery, we would urge them to contact a specialist agricultural accountant to see how they can fully benefit from the announcement.”
The announcement is likely to cost the Government in the region of £2 billion, and according to the Chancellor, some 99.8 per cent of businesses will pay no tax on investment.
Other measures announced in the Budget that will be welcomed by farmers include £150 million for flood defences, and an extension to apprenticeship grants.