The Chancellor’s measures announced last week could give businesses an opportunity to invest
Agricultural businesses received an incentive to invest in their businesses in the Chancellor’s Budget last week, despite a future hike in corporation tax.
Corporation tax will increase from 19 per cent to 25 per cent, although those with profits under £50,000 will remain on the 19 per cent rate, with marginal relief available for those with profits of £50,000-£250,000.
But Rebecca Davidson, rural affairs specialist at NFU Mutual, said there was a big incentive for farmers to invest.
“Companies investing in qualifying plant and machinery between April 1, 2021 and March 31, 2023 will get a 130 per cent first year capital allowance,” she said.
“This will allow companies to cut their tax bill by up to £25 for every £100 spent and will make it much more attractive for farm businesses to invest.”
Old Mill associate director Catherine Vickery said limited companies were being provided with a ‘great chance’ to invest heavily and grow ahead of the changes to corporation tax.
She said on integral features, such as plumbing and electrical installations in agricultural buildings, farmers will still be able to claim up to £1 million under the Annual Investment Allowance each year at 100 per cent.
“But under the new super-deduction, everything over and above that is now also eligible for a 50 per cent first-year allowance for these special rate assets – up from 8 per cent," said Ms Vickery.
The Chancellor also introduced temporary loss relief rules, which means sole traders, partnerships and companies making a loss can now carry this back three years to reclaim tax paid in that time.
It applies to losses of up to £2 million per year in the years ended April 5, 2021 and April 5, 2022.
Nigel May, partner at MHA MacIntyre Hudson, said the super deduction produced enhanced relief but was time limited to target companies which have accumulated cash during the pandemic.
“Getting cash moving is obviously vital to the economy and the measure should ensure that businesses are properly equipped to make the economy grow,” he said.
But property tax expert specialist E3 consulting managing director Alun Oliver urged the Chancellor to reconsider expanding the relief as it only covered those subject to corporation tax.
“This appears to be grossly unfair, given that much economic activity is through other corporate entities such as Limited Liability Partnerships, individuals or ‘old style’ partnerships,” he said.