Farm house

[LastoftheSummer]

Hi,

Not a farmer but do take an interest if farming activities...thought I'd ask you guys a question that I don't know answer to.

If a farmer rents a farmhouse with some land for crops, sheep, cows etc does the rent class as a business expense and get included in their business overheads, or is it classed as a personal cost?

Cheers in advance!

 

[toquark]

It will go against the profit of the business if there is any, so he won’t pay tax on it.

 

[LastoftheSummer]

ahh okay. I've heard and read about farmers only making small profits and id wondered how they actually manage to pay rent and bills etc but knowing that rent is already included in profit figures that makes much more sense now. thank you

 

[toquark]

ahh okay. I've heard and read about farmers only making small profits and id wondered how they actually manage to pay rent and bills etc but knowing that rent is already included in profit figures that makes much more sense now. thank you

A lot of general living expenses will be put through farm businesses, much like any business. However farms are unusual as the farmhouse often acts as the farm office and a significant amount of genuine business will be conducted within its walls therefore a lot of household expenditure can be offset, unlike, for example, somebody who owns a factory which is situated away from their dwelling.

 

[LastoftheSummer]

A lot of general living expenses will be put through farm businesses, much like any business. However farms are unusual as the farmhouse often acts as the farm office and a significant amount of genuine business will be conducted within its walls therefore a lot of household expenditure can be offset, unlike, for example, somebody who owns a factory which is situated away from their dwelling.

interesting. thats opened my eyes really as it always seemed that most small farmers were only just breaking even, and i always wondered where all the extra cash came from to actually cover living expenses. but as it seems the business covers a lot of these expenses, in theory the farmer shouldnt need too much profit left over to cover living expenses?

 

[holwellcourtfarm]

interesting. thats opened my eyes really as it always seemed that most small farmers were only just breaking even, and i always wondered where all the extra cash came from to actually cover living expenses. but as it seems the business covers a lot of these expenses, in theory the farmer shouldnt need too much profit left over to cover living expenses?

A consulting engineer I used to work with had a weekend retreat in Suffolk. He often socialised with several local farmers there. We were discussing this very issue one day and he said he'd been quite surprised, given how well they lived at home, that none of them could afford to join him on a foreign trip. Much of their lifestyle cost at home was paid by the business, quite legitimately, but they didn't have the profit to actually withdraw the cost of the holiday he took.

 

[bobajob]

interesting. thats opened my eyes really as it always seemed that most small farmers were only just breaking even, and i always wondered where all the extra cash came from to actually cover living expenses. but as it seems the business covers a lot of these expenses, in theory the farmer shouldnt need too much profit left over to cover living expenses?

Profit shouldn't be seen as a bad thing, after all we all need to make one to and pay some tax to keep the economy going.
Its not all rosy, looking from the outside it might seem it.
If you work out a farmers income into an hourly rate for every hour worked (and paperwork at night) no overtime etc. I forget the exact figure it's something like £3.50 an hour.

 

[tullah]

Many tffers use not just the wooden chair in the office but every room in the house judging by the hours of darkness spent improving their businesses on here. The tax free status of the house needs upping.
Perhaps the NFU could put in a word!

 

[toquark]

interesting. thats opened my eyes really as it always seemed that most small farmers were only just breaking even, and i always wondered where all the extra cash came from to actually cover living expenses. but as it seems the business covers a lot of these expenses, in theory the farmer shouldnt need too much profit left over to cover living expenses?

Pretty much. A few years ago there was a report which suggested (quite accurately) that farm profits were down to about £12k per annum. Perhaps unsurprisingly that was also the level of personal tax free allowance for private drawings.

Not that I’m suggesting farmers are out to fiddle the system, the vast majority are just running businesses in a prudent and legitimate manner the same as anyone would and is able, however the report’s headline was emotive and not a little disingenuous.

 

[Hampton]

interesting. thats opened my eyes really as it always seemed that most small farmers were only just breaking even, and i always wondered where all the extra cash came from to actually cover living expenses. but as it seems the business covers a lot of these expenses, in theory the farmer shouldnt need too much profit left over to cover living expenses?

Isn’t the point of any business to make a profit?

 

[delilah]

whine

 

[Strangelybrown]

Isn’t the point of any business to make a profit?

Not OP but i would say so, but there must be people out there who are happy aslong as their business and living costs are covered, and any profit on top is just a nice bonus?

 

[farmerm]

Pretty much. A few years ago there was a report which suggested (quite accurately) that farm profits were down to about £12k per annum. Perhaps unsurprisingly that was also the level of personal tax free allowance for private drawings.

Not that I’m suggesting farmers are out to fiddle the system, the vast majority are just running businesses in a prudent and legitimate manner the same as anyone would and is able, however the report’s headline was emotive and not a little disingenuous.

I think some folk love to buy shiny depreciating assets rather than make a profit, draw any money or pay tax. Working to live or living to work

 

[Old Tup]

interesting. thats opened my eyes really as it always seemed that most small farmers were only just breaking even, and i always wondered where all the extra cash came from to actually cover living expenses. but as it seems the business covers a lot of these expenses, in theory the farmer shouldnt need too much profit left over to cover living expenses?

So which paper can we read the article in?

 

[toquark]

Nothing wrong with sensible reinvestment to lessen the tax burden but there are a lot who love to buy shine

 

[Doing it for the kids]

Not OP but i would say so, but there must be people out there who are happy aslong as their business and living costs are covered, and any profit on top is just a nice bonus?

i know several who doNt much care for profit.

so long as each day they can go farming and afford food they are happy as can be!

 

[holwellcourtfarm]

i know several who doNt much care for profit.

so long as each day they can go farming and afford food they are happy as can be!

There are plenty in here who appear to be content to spend next year's income so they can drive a shiny new tractor/combine/sprayer/forager bigger than the neighbour's

 

[LastoftheSummer]

So which paper can we read the article in?

i'm not sure i follow? i havent read this in one specific place its just the general impression i get. obviously i could be massively wrong

 

[Nearly]

In most farming partnerships the farm pays all the bills and then at the end of each year the accountant allocates a (largeish) percentage of these as personal expenses and they go down on the tax return as personal drawings and tax is paid on them.
No-one lives for free but farmers don't do badly if there are multiple business partners in a house.

 

[Stuart J]

interesting. thats opened my eyes really as it always seemed that most small farmers were only just breaking even, and i always wondered where all the extra cash came from to actually cover living expenses. but as it seems the business covers a lot of these expenses, in theory the farmer shouldnt need too much profit left over to cover living expenses?

That's true, but profit also has to cover business investment. Otherwise you go backwards.