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Achieving The Grant And Tax Breaks For The Horse

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Julie Butler - Expert Author

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7 June 2011 

Many equine businesses are struggling from the impact of the recession on their industry, and might glance to their neighbouring farmers, who seem to be prospering, and wonder if they are missing anything.  The advantages are all there, they just have to ensure that they are being picked up. 

Grants

The ‘Single Payment Scheme’ known as the Single Farm Payment applies to equestrian property as well as farms, so if this has not been claimed consideration should be given to apply for this.  Most equestrian properties have woodland or an opportunity to plant woodland to provide shelter and protection and there are grants from the Forestry Commission for planting and management.

Renewable Energy Incentives

The Budget in March introduced tax relief and plans a consultation on Feed-in Tariffs (FITs) and Renewable Heat Incentives (RHI) with the aim of clarifying the rate at which allowances may be claimed.  RHIs have been prominent in the March Budget and need to be explored.

Assuming issues such as grid connections, planning and funding can be negotiated, the renewables options open to farmers and landowners are numerous and rewarding, if approached correctly.  The options have opened up further following the details of the RHI, revealed in March 2011.  This Phase 1 announcement applies to non-domestic installations and to eligible plant installed after 15 July 2009.  Phase 2, to be announced next year, will extend the incentive to domestic installations and additional technologies.

In both cases, and like FITs, the RHI offers the producers of heat from renewable sources a guaranteed payment for every kilowatt-hour of useable heat produced.  The details of the scheme, which comes into force in June 2011, were recently announced and will offer still more opportunities for rural landowners including equine businesses.

The RHIs are not just noisy turbines or solar panels that will make horses shy but harvesting rainfall and utilisation of waste efficient digestion of the muck heap comes to mind.

Tax Reliefs

For a commercial equine operation there is the potential for 100% inheritance tax relief for a business, the offset of losses against other income, and the reclaim of input VAT subject to the problems of partial exemption through liveries etc.

In addition, if guidance is obtained from the recent Budget there is the opportunity to form EIS companies in various areas of bloodstock or, if necessary, the RHI.  What is EIS?

The Chancellor of the Exchequer considers ‘small businesses are the innocent victims of the credit crunch’.  He announced the improvement of the Enterprise Investment Scheme (EIS).  Subject to EU approval, the rate of income tax relief for such an investment will increase from 20% to 30% from 6 April 2011.  Further changes will be made to such schemes and Venture Capital Trusts (VCTs) from April 2012:

•               An increase in the thresholds for the size of qualifying company for both EIS and VCTs to fewer than 250 employees, and to the company having no more than £15 million of gross assets before the investment;

•               An increase in the annual amount that can be invested via an EIS or VCT in an individual company to £10 million; and

•               An increase in the annual amount that an individual can invest through EIS to £1 million.

Certain energy-efficient hand dryers are to be added to the list of technologies that qualify for 100% allowances as energy-saving technology.  This will be done during summer 2011, and effective from April 2011, tax relief for research and development expenditure by companies that fall within the small and medium-sized enterprise definition is to be increased. 

Currently qualifying expenditure benefits from 175% relief.  Subject to EU state aid approval, this will be increased to 200% from April 2011 and 225% from April 2012.

The Government also plans a consultation on feed-in tariffs and renewable heat incentives with the aim of legislating to clarify the rate at which allowances may be claimed.

The time is therefore ripe for all equine businesses to look at tax and commercial efficiency.  Farming (and therefore stud operations) is excluded from EIS but breeding operations without land, the RHIs, racing syndicates etc, are eligible.

For those equine businesses that feel in a “hole” there are currently a number of tax breaks, grant advantages and outside investment alternatives available through syndicates and RHI.

With the Annual Investment Allowance (AIA) of £100,000 of First Years Allowances (FYAs) available before 5 April 2012 this is the time to act and not sit back – there are opportunities and they need to be seized and taken advantage of.

Summary

Do not miss out on the recent Budget, the agricultural p grants and the Chancellor wanting to help “small businesses which are innocent victims of the credit crunch”.  Take the opportunities – there are many outside investors wanting to invest and this can be achieved tax efficiently.  Appraise all grant and RHI opportunities together with outside investors looking for commercial advantages and tax protection.  Do not miss the alternative.


About the Author

Supplied by Julie Butler F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire, SO24 9BH.  Tel: 01962 735544.  Email; j.butler@butler-co.co.uk, Website; www.butler-co.co.uk

Julie Butler F.C.A. is the author of Tax Planning for Farm and Land Diversification of which the 3rd edition is to be published shortly (Bloomsbury Professional), Equine Tax Planning ISBN: 0406966540, and the forthcoming Stanley: Taxation of Farmers and Landowners (LexisNexis)



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Article Published/Sorted/Amended on Scopulus 2011-10-25 14:58:18 in Tax Articles

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