Minimising the Tax Crunch for Arable Farmers
Arable farmers are likely to have made decent profits in the 2021/22 tax year – leaving potentially steep tax bills at a time when cash flow and profitability could be extremely tight. So, how can you plan ahead to minimise the crunch?
Phil Kirkpatrick – rural accountant and adviser at Old Mill – advises submitting a tax return as early as possible in order to best prepare for a looming tax bill.
In theory, there could be bigger profits for 2021/22 because inputs were cheap compared to now, and a lot of farmers benefited from the higher grain prices later in the season though it probably doesn’t feel that way because of the immense cost of spring fertiliser.
Importantly, any fertiliser purchased for crops to harvest this summer will sit in the same tax year as the harvested crop – regardless of when it was bought. This means that the expense won’t be offset against the higher profits of 2021/22 – instead it will go into the 2022/23 financial year. And while grain prices are currently high because of the situation in Ukraine, at some point they will likely come back down – we just don’t know when.
27th April 2022
Phil Kirkpatrick See profile
How can Old Mill help?
For most businesses – depending on their year-end – the tax incurred in 2021/22 will be payable in January 2023, at a time when cash flow – and potentially profit – could be tight. Click the article below for a more detailed insight into how you can reduce your tax bill in 2022.