Farmers advised to buy half their fertiliser requirements for 2023 now!
and on Freeview 262 or Freely 565
According to Omagh-based Seamus McCaffrey this approach represents the most effective way of ‘risk managing’ one of the most expensive inputs required on local farms.
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He continued:“Farmers are operating in an extremely volatile environment, where the purchase of inputs is concerned.
“Agflation is currently in excess of 20%. But the price of fertiliser has almost trebled over the past year. And no one can predict with any certainty how this market will perform over the coming months.”
According to McCaffrey, risk management is all about bringing stability to bear within a business model.
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“Fertiliser prices may fall back over the coming months. On the other hand, they may strengthen further.
“By buying enough fertiliser now to cover first grazing and first cut silage 2023, farmers are bringing a degree of certainty to the running of their businesses for the coming year.”
But what payment options are available for farmers going out into the fertiliser market now?
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Step one in this process, according to McCaffrey, is for farmers to establish an accurate cash flow projection for their businesses.
“All farm accountants will be available to work through this process with clients,” he further explained.
“Armed with these figures farmers can then go to their banks. Two fundamental questions then arise: is there scope within an existing overdraft to pay for fertiliser? Or should an appropriate loan or finance scheme be set up?”
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McCaffrey also confirmed that many farmers across Northern Ireland will have significant tax bills to pay at the end of January next.
“Many business registered strong profits for the 2021/22 year, the final tax payment for which will be paid at the end of January 2023,” he commented.
“And despite the increase in input costs, the current financial year has seen a significant number of farms across Northern Ireland generating very healthy performance figures.”
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From a tax management point of view, the Omagh-based accountant confirmed the option of averaging farm accounts over a two or five-year period, the farmer having the right to elect for the most tax advantageous.
“This is an issue that farmers can discuss with their accountants at those times when actual tax returns are being submitted to HMRC,” he further explained.
“But the reality is that farming in Northern Ireland is about to enter a period of increasing rates of tax.
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“The rate of tax paid by a company will increase from 19% to 25% after April 2023
“The amount that an individual can earn free of tax, the Personal Allowance, is frozen at £12,570 for the next five years. Moreover, the basic rate tax band, where tax is paid at 20% up to £50,000, is also frozen for the next five years.
“In addition, the rate of tax paid by an individual on dividends taken from the company is increasing from 7.5% to 8.75% from 6 April 2023.
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“The effect of each of these tax increases is that it will become increasingly difficult to retain profits in the business.”
McCaffrey concluded: “It’s also important for farmers to act now in order to reduce their tax liability for 2022/23. The first step in this process is to generate a profit projection for the year to date. This can be worked through with one’s accountant.
“Steps that can be taken to moderate a tax liability include expenditure farm repairs and the purchase of new or second-hand machinery.
“Investing in a pension is another option in this regard.
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“Students employed on the farm completing a third level course in agriculture can be paid up to £15,400, per yeartraining allowance by the farm business. This is an eligible expense to the farm business and tax free to the student provided all conditions are met.