Farmers have been encouraged to 'move quickly' in order to exploit a tax window of opportunity for farm machinery purchases.
Hidden in the Autumn 2018 budget is tax relief which could allow farming businesses to invest and grow, effectively benefitting from £1 tax relief for every £1 spent.
The Annual Investment Allowance (AIA) relief allows expenditure on machinery purchases up to the AIA limit to be set against farm profits in the year the expenditure occurs.
In 2018 the AIA stood at £200,000 and it has now risen to a new threshold of £1m until January 1st, 2021 when it reverts to its former £200,000.
With this deadline in mind, JCB Finance says it is 'essential' that farming businesses looking to replace ageing and unreliable kit act fast.
JCB Finance Managing Director, Paul Jennings, said poor replacement planning could mean missing out on all the available tax relief, or even worse, paying more tax than is required.
He said: “This important tax incentive allows 100% tax relief in the first year and is designed to encourage farming businesses to invest in machinery, vehicles and a broad range of other assets.
“Depending on the business’ rate of tax, it is an open invitation to invest in machinery and secure the equivalent of a 19% to 45% subsidy.
“Better still – if you acquire the machinery via a Hire Purchase agreement the acquisition, for tax purposes, is treated as if cash had been paid - plus any interest payable is tax deductible too.
“However, your year-end date impacts on the amount of relief available. Getting the timing and the amounts right is crucial to your business.”
By increasing the relief on qualifying expenditure up to a £1,000,000 limit, those farming businesses already spending up to the £200,000 threshold now have a considerable incentive to increase or bring forward their capital expenditure on machinery, Mr Jennings said.
