7 top tips for farm businesses

British farming is in the midst of major change, from shifts to new support schemes, to playing an key role in combatting climate change and food security issues.

Here are our top areas for farming businesses to focus on over the next few months:

1. Take advice on new grant schemes

Whilst information regarding the schemes being introduced to replace the Basic Payment Scheme (BPS) in England is slow to be released. It is certain that almost all farmers will be worse off by 2027 when BPS ends, but income from the new schemes will ease the pain.

2. Be mindful of Tax relief on capital expenditure​

​Many farmers leave capital expenditure until late in their financial year when they have a good idea of their likely profit, but with the delivery date for new machinery likely to be many months ahead, decisions will have to be made sooner. The date for most purchases to qualify for Capital Allowances is the date of delivery, but for assets on hire purchase, there is an additional rule that the asset must be in use by the end of the accounting year.

3. Are your Wills and Partnership Agreement up to date? 

Changing family circumstances and property values may require changes to be made every few years. Don’t assume all your assets qualify for 100% Agricultural Property Relief – residential properties not occupied by working farmers, and land/buildings with development potential are examples of assets that could be subject to Inheritance Tax.

4. Lump-sum retirement scheme

If you’re contemplating ceasing farming or scaling back activities in the next couple of years, consider whether the English lump-sum retirement scheme is appropriate for you. Final details of the scheme have now been announced and applications must be made by 30^th September 2022.

5. Red Diesel Rules

If you operate a contracting business, remember to check the new rules for red diesel which came into effect in April. These particularly impact contractors who undertake non-agricultural services such as groundworks on a construction site.

6. Don’t ignore all the talk about carbon net zero

Many businesses in the food chain are now asking their farm suppliers about their carbon footprint. These businesses will have a target of reaching net zero by 2030 or 2040, and will encourage suppliers to have policies in place to do the same.

7. Ensure VAT Returns are submitted on time and watch out for penalties

The vast majority of farmers are entitled to VAT repayments, so submitting returns promptly helps cashflow, but for smaller businesses that have little VAT to reclaim at certain times of the year, it’s tempting to submit several returns at the same time. From January 2023 each late return incurs a penalty point, which may result in a future penalty of £200. A business submitting quarterly VAT returns is penalised when it reaches four points, and a business making monthly returns when it reaches five points.

Planning ahead will help combat some of the impact felt by the changes to come and while this will be difficult in some cases as we wait for more information on the new support schemes, planning around the elements of the business you are able to foresee or control to some degree can never be a bad thing.