HIDDEN in the Autumn 2018 budget is a valuable tax relief which could allow farming businesses to invest and grow – effectively benefitting from £1 tax relief for every £1 spent – if they act quickly, says JCB Finance.

The Annual Investment Allowance (AIA) relief allows expenditure on machinery purchases up to the AIA limit to be set against farm profits in the year the expenditure occurs. In 2018 the AIA stood at £200,000 and it has now risen to a new threshold of £1m until January 1st, 2021 – when it reverts to its former £200,000.

With this deadline in mind it is essential farming businesses looking to replace ageing and unreliable kit, consult with their accountant now to maximise any available tax relief. Poor replacement planning could mean missing out on all the available tax relief, or even worse, paying more tax than is required.

JCB Finance MD, Paul Jennings, said: “This important tax incentive allows 100% tax relief in the first year and is designed to encourage farming businesses to invest in machinery, vehicles and a broad range of other assets.

“Depending on the business’ rate of tax, it is an open invitation to invest in machinery and secure the equivalent of a 19% to 45% subsidy. Better still – if you acquire the machinery via a Hire Purchase agreement the acquisition, for tax purposes, is treated as if cash had been paid - plus any interest payable is tax deductible too.

“However, your yearend date impacts on the amount of relief available. Getting the timing and the amounts right is crucial to your business. We are already recommending to our customers that they speak to their accountant and to our JCB Finance team now, so they can plan the optimum time to take delivery of their machinery.”

By increasing the relief on qualifying expenditure up to a £1,000,000 limit, those farming businesses already spending up to the £200,000 threshold now have a considerable incentive to increase or bring forward their capital expenditure on machinery.

The chart below illustrates the maximum amounts available by showing four different company financial year ends, and how vital it is to spend the right amount within the right periods in order to maximise tax benefits. Given the lead times of some farm machinery from order to delivery, this also needs to be carefully factored in to buying plans.

South West Farmer:

JCB Finance has more than 40 years’ experience in providing competitive asset finance for customers in the agricultural sector, so understand the importance of offering fast, flexible finance solutions which help farmers to preserve their working capital by spreading the cost in a tax efficient manner.

For more information please visit www.jcb-finance.co.uk/aia and to find out about all the flexible finance options available from JCB Finance and to receive a quick quote call 0800 150650 or log on to www.jcb-finance.co.uk