Farm advice groups have criticised the Government’s new super deduction – a capital allowance offering up to 130 per cent relief on qualifying plant and machinery – for failing to help farmers and rural businesses.
Announced in the Budget and launched on 1 April 2021, the new tax relief is available for two years and has been designed to help companies invest in their recovery and growth following the events of the last 12 months.
However, the new tax scheme is only available to companies, in part to make up for a rise in corporation tax from April 2023.
Unfortunately, estimates suggest that only 10 to 15 per cent of farms involve a company in any form, with most being run as partnerships or as a sole trader entity. This means that many farms and rural businesses will not benefit from this tax relief.
In response to this, a joint lobbying initiative from the Central Association of Agricultural Valuers, Tenant Farmers Association (TFA), National Farmers Union and Country Land and Business Association is calling for the allowance to be extended to partnerships and sole traders.
This group argues that by excluding these businesses, a substantial part of the economy will suffer at a time when businesses require investment all to achieve the necessary improvements in productivity.
Though Corporation Tax rates are set to rise in two years, the yield from income tax and other personal taxes is also expected to increase due to a freeze on personal tax also announced in the Budget.
“Believing the tax regime should be neutral between business structures, and considering that the economy is crying out for investment to improve productivity and achieve recovery, we do not see why a large number of businesses are excluded in this way,” the groups said.
“Capital allowances should be neutral between business structures and the super-deduction capital allowance should be open to all.”
George Dunn, TFA Chief Executive, added: “We support the government’s agenda targeting productivity improvements, but it must match its rhetoric with sound actions.
“Limiting the capital allowance super-deduction to just incorporated businesses will exclude the vast majority of farming and rural businesses, misunderstanding the operation of the rural economy and limiting the extent of their contribution to wider economic growth.”