Environmentally friendly tax relief offers significant savings to farmers
Farmers considering investing in environmentally friendly buildings or equipment could benefit from a new tax relief announced in Chancellor Alistair Darling’s budget.
The new Enhanced Capital Allowances (ECA) offer energy saving or water conserving plant and equipment a 100% write off in its first year, says accountant Old Mill Rural Services. “This could be a major boost for anyone considering putting in new dairy infrastructure to meet tighter regulations under Nitrate Vulnerable Zone proposals, for example,” says Mike Butler, director of rural services.
Eligible water conserving options include water efficient taps, showers and toilets, slurry separators, meters, and rainwater harvesting equipment. Energy saving lighting, refrigeration equipment, boilers and compressors also qualify for the new allowance.
“With improved profits in arable and dairy sectors, as well as tightening environmental legislation, many farmers are planning significant reinvestment in their business over the coming years,” says Mr Butler. “This new allowance could provide them with a major tax saving for adopting environmentally-friendly practices. Not only will they have lower tax bills, they will enjoy lower utility bills as well.”
Many dairy farmers are considering installing rainwater harvesting technology on new buildings, and it is possible that a significant proportion of the building itself will qualify for the 100% first-year allowance.
Currently, agricultural buildings qualify for a 4% annual allowance, but this is being phased out from April. Capital allowances on plant and equipment will offer a 100% write in the first year from April, up to a maximum of £50,000, followed by a 20% annual write-off thereafter. “This is great news for anyone buying new plant and equipment,” says Mr Butler.
“But someone buying a new tractor can quickly reach the £50,000 limit. Fortunately, the ECA will run alongside the normal Capital Allowance regime, and is not capped, so farmers buying a new tractor and investing in environmentally-friendly equipment will benefit from full relief on both purchases.”
This is particularly welcome, given the significant increase in farmers’ likely tax liabilities due to higher farm profits and the phase-out of Agricultural Building Allowances, says Mr Butler.
Anyone looking to erect a tax-efficient agricultural building and reduce their income tax bill should consider using a Self-Invested Personal Pension (SIPP), he adds.
“Take, for example, a farming partnership with £120,000 profit this year, which wants to erect a £120,000 new building. By paying £60,000 into a SIPP before April 5, and another £60,000 after April 6, the partnership will save £24,000 in tax for each tax year. They can then invest that money into the new building, getting 100% tax relief, and reducing the actual cost of the build to just £72,000.”
Fore more details on how to make the most of SIPPs or the new Enhanced Capital Allowances, contact Mike Butler on 01935 709301.
Ends.
Notes to editors
For more information contact
Alan Stone – Marketing Manager
Tel: 01749 335007
E-mail: alan.stone@oldmillgroup.co.uk
About Old Mill Rural Services
Old Mill accountants and financial advisers employ 160 staff in three West Country offices. The Rural Services teams are headed by Partners Mike Butler (Yeovil) and Ian Sharpe (Shepton Mallet). Looking after nearly 1,000 farmers they are one of the leading specialist farm accountants, and are happy to help with any financial and tax-related enquiries from the media.