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Where Taxpayers and Advisers Meet

Understanding what expenses are allowable

Steveg1985
Posts:6
Joined:Thu Dec 07, 2017 2:05 pm
Understanding what expenses are allowable

Postby Steveg1985 » Thu Dec 07, 2017 2:17 pm

I'm in the process of setting up my own business and I'm trying to work out possible profit margins but for the life of me I can't get my head around what expenses are deductible. In my opinion anything that costs me money to run my business should be deductible but I guess the world isn't the same as my opinion.

I plan to setup a farm but my farm will be nothing like conventional farms. Conventional farms go against nature and destroy landscapes by tilling soil, which kills fungi, spreading chemicals etc.

I plan to recreate topsoil and create a thriving food forest and and be extremely diversified.

For the first two years I expect my expenses to be nearly 100% of my profit from selling produce I grow as the land I have bought has practically no topsoil and still contains harmful chemicals.

I will have to spend money to make the land suitable for organics. Such as buying large amounts of seeds to plant specific crops that won't sell for the first 2 years. These crops will put nutrients in the soil. I will then have to buy tons of timber as I will build raised beds to grow my first crops in, with organic top soil I have got from elsewhere.

I need to buy tons of bentonite as I will be digging drainage ditches in a way that utilised water efficiently the water is stored and I will grow out fish for harvest.

Trees will be grown and sold eventually live stock will be allowed to free roam throughout the forest. I know this can provide a suitable income however I need to understand if all my expenses in the first two years are tax deductible. Everything I buy for the farm is basically fertiliser.

Even the timber joists I will buy for raised beds will eventually decompose due to rich amounts of fungi in the soil.

So my question is, if I spend a large amount of money in the first year on,
Seeds,
Mulch (straw, bark chips, manure)
Timber
Small trees to be grown and eventually sold
Bentonite (soil conditioner to stop water leakage)

Would all of these be allowed as tax deductible and if so what would I need to prove it? I plan to eventually get an accountant if anyone can recommend a good one in north east England. But for now I am in planning stage and want to make sure I have a viable plan before I start getting accountants involved

I read somewhere that expenses that are "wholly and exclusively for the business are tax deductible" but then I've read examples of several things that could be wholly and exclusively for the business not being allowed. I could really use help understanding this.

Thanks

GlobalTaxAdviser
Posts:633
Joined:Fri Dec 05, 2014 1:18 am

Re: Understanding what expenses are allowable

Postby GlobalTaxAdviser » Thu Dec 07, 2017 5:33 pm

Hi Steve

Accounting and Tax on Farming is complex and you would need an accountants who specialize in this area. There are special reliefs available.

There are lots of points you mention and think you are better off arranging an face to face meeting with an accountant from the start. Make sure they have farming clients.

Kind Regards

Sash

etf
Posts:1278
Joined:Mon Nov 02, 2009 5:25 pm

Re: Understanding what expenses are allowable

Postby etf » Thu Dec 07, 2017 11:29 pm

Definitely not a specialist subject for me either, but there is an article in December's tax adviser magazine which provides a guide on maximising tax relief from woodlands which may be of interest, even if it does not address your questions (see link below). I suspect if you search for farming tax articles on-line you will probably be able to find further advice to help your understanding of this subject.

https://www.taxadvisermagazine.com/arti ... 80%8Awoods

KR

etf

Steveg1985
Posts:6
Joined:Thu Dec 07, 2017 2:05 pm

Re: Understanding what expenses are allowable

Postby Steveg1985 » Fri Dec 08, 2017 5:54 pm

I spoke to an accountant today and I don't know if I know more than him or I just don't have a clue.

Everything I have read says I can't claim capital allowances for farm barns to house animals.

The guy I just spoke to said it's a genuine capital expense you can claim it.

He also said I should buy the 200,000 land through the company and that means I can offset 200,000 capital investment from future profits... in other words no corp tax until I make 200,000 profit.

Surely he's not right?

wamstax
Posts:2019
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Understanding what expenses are allowable

Postby wamstax » Fri Dec 08, 2017 6:05 pm

you might have a look at
https://www.gov.uk/hmrc-internal-manual ... al/ca40050

Phased out
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Understanding what expenses are allowable

Postby bd6759 » Fri Dec 08, 2017 7:12 pm

Surely he's not right?
No. He's not.

Steveg1985
Posts:6
Joined:Thu Dec 07, 2017 2:05 pm

Re: Understanding what expenses are allowable

Postby Steveg1985 » Fri Dec 08, 2017 7:23 pm

My suspicion was that it was fased out even though it's incredibly unfair when I may need wooden barns to house live stock which is a genuine expense.

How do I go about finding an accountant that I can trust to be correct?

Steveg1985
Posts:6
Joined:Thu Dec 07, 2017 2:05 pm

Re: Understanding what expenses are allowable

Postby Steveg1985 » Fri Dec 08, 2017 7:49 pm

I have read that if the barn is made via wood and can be dismantled and moved for example using concrete footings with bolted 6 x 6 studs sitting on the pillars I could move it with ease and this qualifies as plant and can be capital expenditure?

Is this correct?

It's like tax law is deliberately made to Confuse people.

Even on the gov.uk website it specifically states that all companies need to record the name, address and other details for every customer for every sale the company makes. That's rediculous companies like Tesco don't ask me name and address when I buy a steak.

Are accountants reliable, if they make a mistake am I covered?

wamstax
Posts:2019
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Understanding what expenses are allowable

Postby wamstax » Fri Dec 08, 2017 7:57 pm

You need one to one advice on your questions as there are arguments for and against your approach suggested in your latest posting. Only an experienced tax adviser who has experience of this type of trade should be trusted to give assurance.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

wamstax
Posts:2019
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Understanding what expenses are allowable

Postby wamstax » Fri Dec 08, 2017 8:00 pm

Gov uk is only HMRC guidance on matters and does not constitute law. They do not have the final say as ultimately law is dictated BT Tribunals and Courts.

If you issue an invoice it’s not unreasonable to record the customer name but HMRCs want is not be all and end all.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites


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