By Mike Rohan, FDC Group
Budget 2023 announced a new scheme for farmers to allow for accelerated allowances for capital expenditure incurred on the construction of slurry storage facilities and certain associated capital items.
The scheme is designed to incentivise farmers to construct slurry storage facilities to allow for increased volumes to be stored.
This increased slurry storage is intended to reduce reliance on imported chemical fertilisers and to improve water and air quality.
All working towards the government’s plans to improve the environmental sustainability of farming.
Typically, slurry storage construction building costs are deducted from farming profits over a period of seven years through capital allowances, at a rate of 15% in years one to six and 10% in the final year.
In the case of plant and equipment, capital allowances are available at 12.5% over eight years.
The accelerated capital allowance scheme will allow for a deduction of up to 50% per year over the first two years.
This allows for a quicker tax deduction ie over a shorter period, rather than enhancing the tax relief, such as granting a double deduction.
The advantage of accelerating the capital allowances is that farmers achieve a higher saving at the beginning of the project, which aids the funding of the construction costs if a taxpayer has fewer outgoings in income tax, especially where the project is either funded from cash flow or over short-term finance.
Budget 2023 indicated that the scheme would be available on eligible costs incurred during the three-year period running from January 1st 2023 to December 31st 2025.
Due to delays at an EU level, presently the legislation states that the expenditure is to be incurred before June 30th 2023.
The Department of Finance expect that legislation will be revised to state the correct dates in advance of that date.
Tax relief on this scheme is claimed through your annual income /corporation tax return.
The aggregate amount of relief granted shall not exceed €500,000 over the three-year period.
The following slurry storage-related items are eligible for accelerated allowances should they meet with the relevant specifications: Floors and walls of slurry collecting and storage buildings used to house livestock; mass and precast concrete tanks, circular stores, geo-membrane lined stores – all of which must have a roof or cover; farmyard manure pit with roof or cover; collecting and enclosure yards – slurry collecting structure used for holding animals whilst they are waiting to be milked or to be handled; automatic slurry scrappers; simple slurry aeration system.
Individual circumstances vary. If you are unsure of the best course of action, please do talk to your accountant before making any decisions.
Mike Rohan is an Area Manager with FDC Tralee.
Find your local FDC office on www.fdc.ie.