January 30, 2024
Article
Farmers are facing many different challenges at present, but slurry storage is becoming an increasing concern for many farmers. Slurry is relentless and the situation has been worsened by the increased rainfall.
With increasing legislative requirements, it is a time to seriously consider your storage needs and the potential financial implications of meeting the new regulations.
For those that already utilise their slurry well, slurry storage may cost circa £150K+ but will not increase the profitability of the business. Therefore, the repayments will need to be found from the current cash flow.
However, thinking about the tax perspective, slurry storage can be a qualifying expenditure for capital allowances, like a new tractor would be. Therefore, the total cost of the new slurry infrastructure may reduce your taxable profits, in turn reducing your tax liability. Assuming you are eligible for capital allowances and have a tax liability or have had a tax liability from farming profits in the last five years, hopefully there will be at least one cost saving - and which may enable you to reclaim some tax.
For other farmers, who have previously not fully utilised their slurry as a resource, the focus on the slurry utilisation may encourage better use - maximising output with less purchased inputs such as fertiliser. These farmers will still have the need to repay the investment but with a reduced tax liability and a reduction in inputs, they may find it a little easier.
SOME CONSIDERATIONS ARE DETAILED BELOW:
The life of the project – look to match the finance to the life of the slurry storage. Don’t strangle the business to cover the investment. Consider how it will be financed at an early stage and involve your bank manager.
Who are you doing it for? - With any large investment, consider who it will benefit. If this is the next generation, do they agree that it is the way forward? For some it has been the tough conversations that have led to a complete change in direction.
Understand the legal requirements – requests made by the Environment Agency (EA) may exceed the legal standards which you read so make an informed decision about the work you will undertake.
Tax planning - work with your accountant to understand the tax implications and use the opportunity to maximise this, particularly if the work will be done near 31st March2024 year end.
Seek professional advice – always use specialists to assist you, whether that be for planning permission or with regards to EA correspondence or disputes.
All farmers we meet care about the environment and want to do the right thing, but with any business they need to understand the financial implications. As accountants we love to save people tax and therefore if we can take the current slurry situation and use it to save some taxor even get some tax back, then this will make us, and hopefully our clients, very happy.
If you would like to discuss your position or be pointed in the direction of other professionals who can help, then please do get in touch.
