An agricultural expert is urging farmers to take measures to protect their business and investments, following a period of volatility in the farm machinery market.

James Treverton, of rural insurance broker, Lycetts, said farmers need to make informed decisions about new machinery purchases, and with tractor sales from August, 2020, to August, 2021, increasing by a quarter, confidence in capital investment is picking up.

“Farm machinery is a significant outlay, with pre-pandemic figures putting the average gross expenditure on machinery per farm at £36,200,” he said.

With the £1m annual investment allowance (AIA) extended until January 1, 2022, farm businesses can continue to claim up to £1m in same-year tax relief for capital investment in plant and machinery.

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A new capital allowance for businesses investing in plant and machinery was announced in the latest Budget, which will be in place until March 31, 2023. The ‘super deduction’ incentive allows companies a reduction in their tax bill for every pound they invest in new equipment.

“Farmers need to conduct a full audit of machinery, taking account of predicted value, depreciation, remaining interest, machinery condition, suitability for current operations, and running costs.

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“Farmers should also have a clear idea of how current vehicles and potential investments fit within their yearly budget. Dated machinery may not be as effective and have higher running and maintenance costs – but new machinery involves significant upfront costs that eat into often stretched income.

He added that with the phasing out of direct payments, the government has taken the opportunity to increase domestic productivity and minimise environmental impact at the centre of future funding,” he explained.

“The introduction of the Farming Investment Fund, due to be released in the autumn, underlines the government’s commitment to driving agricultural business investment.

“The fund presents an opportunity for farmers to invest in new and innovative technologies, such as precision agriculture equipment,” he concluded.