Farmers who have made taxable profits have been reminded not to forget about the temporary increase in Annual Investment Allowance (AIA) tax relief.
The relief was announced in the 2018 autumn budget, which allows farming businesses to invest and grow, effectively benefiting from £1 tax relief for every £1 spent.
The AIA was increased to £1m per year until 1 January 2021 to help support businesses to invest and grow, by accelerating the relief that would normally be applied over several years.
Whilst it may seem as though January 2021 is still a long way off, depending on a business’s financial year-end, the cut off for benefiting from the increase can be sooner rather than later, according to JCB Finance, who are urging farmers not to forget the relief.
For example, if the financial year-end is March farmers would need to make purchase or enter into a Hire Purchase agreement before the 1st April 2020.
Otherwise, the allowance available would begin to reduce and progressively revert to the £200,000 - and farmers could end up paying more tax than is necessary.
Most businesses can claim the AIA against qualifying assets like plant and machinery or commercial vehicles placed on Hire Purchase just as if you had paid cash so you can preserve your working capital and still benefit from the relief.
Business are also encouraged to check out the lead times on orders of new plant and machinery because the relief is only available in the financial year that the purchase was made in.
JCB Finance’s Rob Heldreich said that time is running out to take advantage of this incentive to invest in plant and equipment.
“The temporary increase in the Annual Investment Allowance was a welcome boost for business when announced in 2018.
“I would urge business owners to speak to their accountants and advisors to ensure they get the timing of purchases right to ensure they maximise the available tax savings.”