Cash flow problems continue to build on Northern Ireland’s farms

“Driving all of this is the growing volatility, both in terms of input costs and farmgate returns,” confirmed Omagh-based Seamus McCaffrey.

“Yes fertiliser and feed prices have eased somewhat over recent weeks. But who knows how world events could influence commodity markets during the period ahead.

“Meanwhile farmers remain totally uncertain regarding the prices they will receive for their own produce over the coming months.”

He added:“Volatility is driving uncertainty. And I have never known volatility within agriculture to be at such extreme levels as is the case at the present time.

“Another factor kicking in now is reduced silage yields that have been recorded thus far in 2023.”

Given this backdrop, McCaffrey is strongly advising all farmers to sit down and work through cash flow projections, covering the next six to nine months.

This will entail a listing of all known income sources and outgoings estimated for this period of time.

On that basis, farmers will be in a position to decide if they can continue to operate within their current overdraft facilities.

“It would be no harm for farmers to share the figures arrived at with their accountants,” McCaffrey stressed.

“Keeping the banks in the loop is also important. If an increased overdraft facility is required, the banks will be making the final decision in this regard.”

Factoring-in future tax liabilities will also be a critically important aspect of a cash flow projections.

He said:“Agriculture in Northern Ireland has enjoyed two relatively successful years: 2021 and 2022. This will have tax implications for farm businesses.”

According to the Omagh-based accountant, farming businesses can take a number of steps to minimise their tax liability.

But the starting point is to prepare year to date accounts for the business now. Farmers can work through this process with their accountant.

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McCaffrey added:“The opportunity should also be taken to identify the best trading structure for the business. Farmers can operate as a sole trader, partnership or limited company.”

Exposure to tax liabilities can be reduced in a number of ways.

“First off, the owner of the business can pay a salary to family members working on the farm. This list includes children from 13 years of age. Salaries must be set at levels that are deemed to be reasonable and must be actually paid.

“Sons and daughters from a family attending third level agricultural course are eligible to receive a training allowance of £15,600/annum.”

The accountant went on to confirm that all repairs, farm improvement work – particularly from an improved efficiency plus health and safety perspective – are tax deductable .

“The same principle holds where the purchase of all new and second hand machinery is concerned. The figure that will be featured with the farm accounts is that which features on the invoice excluding Vat.

“The method of payment is irrelevant, from a tax liability perspective.

“Tax averaging is also an option for farming sole traders and partnerships. The farmer can elect for either two year or five year averaging, whichever is more advantageous. A claim must be filed with HMRC within a specified time limit.”

Seamus McCaffrey concluded:“I would also strongly advise anyone involved with a farm business to actively address the issue of succession.

“At a very fundamental level, this will entail the writing of a will and the provision of a second signature on the farm bank account and relevant herd and flock numbers.

“Addressing the issue of succession will also make the challenge of strategic investment within a farm business a more straightforward process.”