Farming businesses across the industry have been encouraged to seize the opportunity in changes in tax relief.
The advice comes after Chancellor of the Exchequer, Philip Hammond’s, 2018 Autumn Budget revealed that the Annual Investment Allowance (AIA) would increase to a new threshold of £1m from 1 January 2019.
The AIA was first introduced in the 2008 Finance Act and allows a business’s machinery purchase to be set against its profits in the year that the expenditure occurs – providing them with 100% tax relief.
Previously, the AIA limit was set to £200,000 but has now risen to £1m until 1 January 2021, when it will revert to £200,000.
Who can claim AIA?
The tax relief can be claimed by all businesses, including farmers, that operate as sole traders, partnerships or through other companies.
However, to qualify for the AIA, the expenditure must go towards an asset that falls under the ‘plant and machinery’ sector.
This would include the likes of combine harvesters, tractors and other agricultural equipment and will also stretch to cover office equipment and transport vehicles – excluding vehicles that can be used for private use.
Our agricultural finance specialist, Rachel Borlace, added that now is the time that farmers should be taking advantage of the tax relief.
“This scheme has been introduced to encourage businesses, including the farming industry, to invest in new machinery and equipment.
“However, the amount of relief you are able to get will depend on your year-end accounts, so timing it right is also very important.”
If you’re looking to utilise the increased threshold by purchasing some new plant or machinery, or have any further questions about AIA, contact us on 0115 958 6872 or email firstname.lastname@example.org for further information on how we arrange finance for you.