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Are you maximising the use of your agricultural tax relief?


Autumn can be a busy time for farmers. Arable farmers have their harvest – often involving a host of temporary workers – to ensure the crop is collected at the exact right time. Dairy and beef farmers have to deal with the transition from outdoor grazing to winter housing and ensuring that there is enough feed to last through the winter.

It needs to be very carefully planned, or else a whole year of profits can be lost and we all know that agriculture is a precarious business at the best of times.

This is why working with an accountant with detailed knowledge of agriculture is vital.

Tax is an important cost to manage. In many ways the usual core tax principles apply. However, there is so much more on top.

Farmer’s averaging can be used to smooth fluctuating profits into the lowest possible tax rate. There is no point in paying a lot of 40% tax one year, and then wasting tax-free allowances the next.

Dairy farms and other farming businesses with a production herd need to consider the use of the Herd Basis. This values your cows or other mature animals at the original historic cost, and so prevents tax charges arising on the general increase in the value of livestock.

Farms tend to spend a lot on building work. This needs to be carefully reviewed to ensure that you are claiming tax relief on items which could properly be classed as repairs or that qualify for tax allowances. Basic buildings do not obtain tax relief, so your accountant needs to work hard to review this.

And, as I discussed in previous articles, there is more to an accountant’s advice than just tax. We all know that farming is an expensive business. Your relationship with the banks is vital.

Your accounts need to be reviewed to ensure that you are portraying everything in the best possible light. Land is included in accounts were appropriate, and possibly at the current value. Values used for equipment should not be too low. The bank understands that you have used the herd basis. And so on.

It is impossible to capture the core of what a farmer should expect from his accountant in such a short article. These are just a few basic ideas.

This is an important tax issue and it is best to discuss it all with you in more much detail so give Barringtons a call now. Call Des on t. 0800 019 1744 or email advice@barringtons.co.uk to arrange a free of charge initial consultation.