Going with the Grain things you may need to know about grain stores
Annual Investment Allowance From 1 January 2019, the Annual Investment Allowance (AIA) increased from £200,000 to £1million per year. This temporary two-year increase will provide 100% tax relief in the year of purchase for plant and machinery as well as integral features such as lighting, heating and water systems. For accounting periods straddling 1 January 2019, the AIA available is time apportioned. Following the Steven May case, with the possibility of grain stores being classed as plant and machinery, the increased AIA limit means that building a new grain store could result in 100% tax relief being achieved. As with any change of tax rules, timing is vitally important. With the apportionment of allowances in accounting years that straddle 1 January 2019, too much expenditure in the wrong period can lead to a loss of tax relief up front, potentially having a drastic effect on tax liabilities.
The acquisition date for tax purposes is often not as straightforward as it would sometimes appear, especially with assets purchased on finance such as Hire Purchase. The various types of finance agreement are treated in different ways for Capital Allowance purposes and the paperwork should be considered carefully to ensure the correct allowances are claimed in the appropriate year. Structure & Buildings Allowance For newly constructed buildings which are not grain stores and therefore do not qualify for plant and machinery allowances, a new allowance has been introduced for commercial property constructed or purchased after 29 October 2018. This allowance gives 2% relief per year for the costs of the fabric of the building. This allowance is known as the Structure & Buildings Allowance (SBA). Pension Schemes The introduction of a new relief for capital expenditure is welcome, especially on assets that since 2011 have received no tax relief. However, with the rate of SBA at only 2% (half the rate of previous IBAs and ABAs) and the additional freedoms pensions now enjoy in terms of income extraction and Inheritance Tax benefits, using a pension for buildings can still be an attractive option.
By using a SSAS (Small Self Administered Scheme), higher rate taxpayers can obtain 40% tax relief on contributions into a pension scheme, with an additional 20% contributed to the pension fund and 20% provided through Income Tax relief. This means that to achieve an additional £10,000 of pension savings, the net cost to an individual is only £6,000. If contributions are then used to fund the construction of a new building, 40% tax relief has effectively been achieved on these costs. This can be much more valuable than the 2% per year offered by SBAs.
For help with any aspect of tax planning for your agricultural enterprise contact Chris George at chris.george@ scruttonbland.co.uk
A g r i c u l t u r a l F o c u s | S C R U T T O N B L A N D | 2 5
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