With AIA having been due to revert back to £200,000 from 1 January 2021, many farming businesses had to consider bringing forward planned capital expenditure. With a large number of farming businesses having a year end of 31 March, any large expenditure incurred between January 2021 and this 31 March 2021 year end would find the annual amount of £200,000 pro-rated to £50,000, further reducing the relief available.
Chris Solt, lead agricultural partner at Lovewell Blake welcomed the news. “The ability to claim full tax relief on qualifying capital expenditure is vital to the agricultural sector.
Given the large outlays needed to purchase a new piece of farm machinery, even when purchased on finance, being able to accelerate the tax relief on the expenditure will greatly assist the farm’s cash flow.”
Qualifying capital expenditure for farming businesses isn’t just the expected machinery such as combines, tractors, ploughs, drills and sprayers. It also includes any ‘integral features’ eg. electrical and plumbing systems for farm buildings, computer systems, solar panels and wind turbines.
“While tax relief should never be the deciding factor as to whether a farming business makes a capital purchase, it is an important consideration when it comes to the timing of the expenditure,” Mr Solt added. “I am sure many of our farming clients will welcome the Government’s news and will no longer feel pressured to rush machinery purchases to before the end of the year.”