An Northern Ireland agricultural accountant has confirmed that significant numbers of farmers in NI are seeking overdraft increases from their banks.
Seamus McCaffrey spoke at a recent dairy farm finance meeting, hosted by the College of Agriculture, Food and Rural Enterprise (CAFRE) in Omagh, Co. Tyrone.
According to McCaffrey: “A number of factors are coming into play here – the impact of the weather, reductions in farmgate prices particularly where dairy is concerned, and the continuing pressure on all input costs to name but three.
“The banks, for their part, recognise the impact of these pressures, and are open to requests from farmers, where changes to existing overdraft facilities are concerned.
“Making this happen will require farmers to present the banks with an accurate six-month cash flow projection. The starting point here, is the completion of an up-to-date set of management accounts.
“Farmers can only project ahead if they know the current financial state of their businesses. Accountancy advice should be sought on these matters, if required,” the accountant said.
McCaffrey commented that agriculture in Northern Ireland is in a state of flux at the present time.
“Weather patterns are changing. The past two years have been characterised by farmers coping with drought in 2022, followed by one of the wettest growing seasons on record in 2023.
“Extremes of climate impact significantly on grass and crop yields in a dramatic way. Last year saw, for example, first and second silage impacted dramatically in terms of forage quality,” he said.
Overdraft increases
McCaffrey continued: “In turn, this required farmers to buy-in additional concentrate cover, all of which comes at an extra cost.
“However, it’s also worth pointing out that a number of farm businesses are still recovering from the impact of the 2022 drought.
“The management pressures on farms right across Northern Ireland are fast changing. This, in turn, has a cash flow impact on all businesses.
“Again, this is an issue that farmers should discuss with their accountants on a regular basis,” he added.
The accountant also stressed that the additional stress on farm families caused by the flux must never be overlooked.
Tax environment
McCaffrey also confirmed the high tax environment, within which all businesses are now operating.
The UK Personal Allowance limit was frozen at £12,570 for six years, back in 2022. Company tax rates were increased from 19% to 25% last year.
In addition, basic rate tax band was frozen at £50,000 for six years, again back in 2022.
“All of this means that farm businesses, for the most part, will be paying higher tax now and over the coming years,” he said.
“The cost of borrowing has also increased significantly. Where core debt on variable interest rates is concerned, the cost of borrowing is now double that of two years ago,” he added.
Looking ahead, Seamus McCaffrey advises farmers to take a number of fundamentally important business management-related steps. The first of these is to maintain records in an up-to-date state.
“Up-to-date record keeping is significant for all businesses. The preparation of management accounts for the year to-date is also vitally important.
“Farmers should actively engage with their accountant estimating their tax liability for the current year. All relevant tax returns must be made by the due filing date.”
According to McCaffrey, there is also an opportunity for farmers to avail of a ‘Time to Pay Arrangement’ available from HMRC.