Make tax plans before submitting farm kit grant application

Ensure you make best use of your annual investment allowance (AIA) if you are considering making an application under the small grants part of the Countryside Productivity Scheme (CPS), farmers are reminded.

The CPS programme, which offers grants of £3,000 to £12,000 to enable farmers in England to invest in new equipment or technology, is a positive leg up for producers, according to Mark Seager, rural services accountant at Old Mill Accountants and Financial Planners.

However, it is important that applicants keep the tax implications in mind and think through what impact it will have on cashflow.

See also: New £60m small grants scheme – all you need to know

Mr Seager said, given the application window closed on 14 March, it is unlikely that any applications will be approved and processed before the end of this tax year, so it was probably not an option to work it into the 2017-18 AIA.

“It might be the case that the current investment plan for the 2018-19 tax year has made use of all of your annual investment allowance of £200,000,” he said.

“If this is the case, look at whether anything can be brought forward before year end, or deferred to the following financial year to make use of the grant in your 2018-19 allowance.”

Timing of spend

It could also be worth considering bringing a planned spend forward to make use of the grant, because funding may not be available beyond the next financial year.

“If you have a machinery and equipment purchase plan for the next few years, it might be that this will need reorganising to fit with the grant.”


From a budgeting point of view, farmers need to remember that the grants only account for a percentage of the costs of the investment.

“The knock-on effect on cashflow needs to be considered – you could get up to 40% in grant money, but you will still have to fork out for at least the remaining 60%,” Mr Seager said.

“This also means that, ultimately, you will only get tax relief on what you spend, which will be for the percentage the grant does not cover.”

See also: How to best use annual capital tax allowances

Mr Seager said the scheme was a great opportunity for those who already know that they want a specific piece of equipment.

But, he added: “There’s no point applying unless you have the cash available to make the purchases – so don’t do it just for the sake of having a grant, especially if it means tying up cash when you don’t need the equipment.”

The rules of the scheme also mean that applicants are tied to the equipment for five years, because it cannot be sold on in that period and must be maintained.

Management accounts

Mr Seager said he would advise applicants to complete a 10-month set of management accounts to look at profitability at the end of the period and estimate the projection for the following two months.

This way farmers would be prepared for how any purchases could benefit the business.

Applicants also need to be aware that they would have to make the purchase and submit receipts within 150 days of being accepted for the grant.

“You can’t use finance or a hire purchase agreement, but loans, credit cards and overdrafts are fine – just make sure you have the ability to pay for it and it is paid for by the business,” he said.

Are you, like many other farms, missing out on tax claims for R&D?

If you’re a limited company, you could be eligible for tax credits if you’re carrying out R&D on your farm. For more information and to find out if you’re eligible visit our R&D tax credits page.

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