A leading agricultural accountant has confirmed that fertiliser purchased now in the Republic of Ireland cannot be used to offset the 2021 tax bill.
“This is because the product will not be used before the end of the current tax year, which concludes for all businesses on December 31,” explained Seamus McCaffrey.
“As a consequence, any fertiliser stocks bought over the coming weeks will simply be listed as a farm asset and, as a result, will be assessed from a tax perspective in this context.
“In other words, the fertiliser becomes categorised as dead stock from December 31, 2021 accounting point of view.”
McCaffrey operates from offices in Omagh and Strabane in Co. Tyrone. However, the business has a very strong client base in Donegal, Monaghan and the other border counties.
He told Agriland:
“The situation is different in Northern Ireland, where farmers can choose which month of the year they wish to close-off their accounts. Many, however, opt for a year end that coincides with the official UK tax year that ends on March 31.
“In these cases, fertiliser bought in the autumn and early winter may well be used before the year-end agreed for these businesses.
“In such instances, the fertiliser purchases can be used to directly offset tax to be paid within the actual year of procurement.”
2021 tax bill
In terms of steps that Irish farmers can take over the coming weeks to offset 2021 tax bill, McCaffrey made a number of broad recommendations.
“The purchase of machinery is an obvious starting point,” he said.
“Equipment of this nature can be written off at 12.5% per annum over an eight-year period.
“The coming weeks will also provide farmers with the opportunity to undertake repair work across their holdings.
“In such instances, there is no need to pay for the work that is completed before December 31.
“Receipt of an official invoice alone before the end of the year is sufficient to have the value of the work undertaken recognised as a valid expense from a 2021 tax planning perspective.”
Soil testing
While re-emphasising the fact that fertiliser purchases now will not help to reduce 2021 tax bills, McCaffrey confirmed that activities such as soil testing, carried out over the coming weeks, do represent a valid 2021 business expense.
“Given the state of current markets, it behoves every Irish farmers to make best use of the chemical fertilisers that are purchased in 2022,” he said.
“The one way of ensuring this can be achieved is to have ground properly soil tested. The best time to carry out this work is over the coming weeks.
“And, again, all costs associated with this activity are fully eligible for tax purposes during the current year, provided an invoice is received before December 31.”
“Effective tax planning is a critically important management aspect within any farm business. With December 31 fast approaching, farmers should seek all the relevant advice they require from their own accountants over the coming weeks, specific to their farm situation,” he concluded.