Machinery dealers/manufactures, have they lost touch with farming reality?

[EddieB]

Regarding ever increasing machinery costs.......

When will we reach the point at which it is more cost effective to replace all the fancy massive tackle with a yard filled with some friendly staff and a fleet of massey 135s.

the really lucky farms could have an international 1455 or even a 55 series John Deere to pull the direct drill.

well on the way to regenerative farming: socially, environmentally and economically?

I think that many of us have too much invested in kit. For me the most marginal piece of kit to own is a combine harvester. The price of the last one I bought (three years old) would paid for a contractor to do our harvest for ten seasons, factor in servicing, repairs, fuel, insurance and paying a driver and I start to look like a bit of a fool.

 

[SilliamWhale]

I think that many of us have too much invested in kit. For me the most marginal piece of kit to own is a combine harvester. The price of the last one I bought (three years old) would paid for a contractor to do our harvest for ten seasons, factor in servicing, repairs, fuel, insurance and paying a driver and I start to look like a bit of a fool.

Combines are such odd ones. Colossal money. Hardly used. Massive opportunity cost lost if you don't have one. Widespread perception they're f**ked at 3000 hours!

 

[EddieB]

Combines are such odd ones. Colossal money. Hardly used. Massive opportunity cost lost if you don't have one. Widespread perception they're fudgeed at 3000 hours!

We used to have ours done by a contractor (father and son team) who came with tow old Dominators and flew through the crop in tandem. We were his biggest customer so always looked after us. When the father died the son dropped most of his customers including us so had to go on our own.

 

[Farma Parma]

Combines are such odd ones. Colossal money. Hardly used. Massive opportunity cost lost if you don't have one. Widespread perception they're fudgeed at 3000 hours!

4000+ hours i agree the whole machine will at some point shake itself to destruction.

 

[RmfJ]

Combines are such odd ones. Colossal money. Hardly used. Massive opportunity cost lost if you don't have one. Widespread perception they're fudgeed at 3000 hours!

Exactly, fine if you can get a contractor when you need him to suit the very tight ever decreasing weather windows, also the possible spread of weeds especially wild oats etc, and the whole of your years work/investment in jeopardy.

 

[Farma Parma]

Exactly, fine if you can get a contractor when you need him to suit the very tight ever decreasing weather windows, also the possible spread of weeds especially wild oats etc, and the whole of your years work/investment in jeopardy.

Wildoats isnt the worry BG far far worse

 

[RmfJ]

Wildoats isnt the worry BG far far worse

Speaking from a west Wales point of view, althoug bg lurking especially with all the imported straw coming in.

 

[tepapa]

out of interest, depreciation is a cost to running a business so whys it added onto profit?

Depreciation is a notional cost that is deducted from your profit to show a more accurate position what your business net worth is accounting for the loss in value of the asset's. But it is not tax deductible so is added back to your profit for the tax calculation.
HMRC allow you capital allowances for asset's brought which you can then deduct from your profit which are at a different rate then the calculation for depreciation. And you can claim 100% tax relief up to a certain amount on asset's brought in the first year, any remaining value is then added to the pool value and reduced at a fixed rate for the remainder of it's value or untill its sold.

 

[db9go]

I think that many of us have too much invested in kit. For me the most marginal piece of kit to own is a combine harvester. The price of the last one I bought (three years old) would paid for a contractor to do our harvest for ten seasons, factor in servicing, repairs, fuel, insurance and paying a driver and I start to look like a bit of a fool.

Then he does not turn up when you want him who is the fool

 

[Bossfarmer]

Depreciation is a notional cost that is deducted from your profit to show a more accurate position what your business net worth is accounting for the loss in value of the asset's. But it is not tax deductible so is added back to your profit for the tax calculation.
HMRC allow you capital allowances for asset's brought which you can then deduct from your profit which are at a different rate then the calculation for depreciation. And you can claim 100% tax relief up to a certain amount on asset's brought in the first year, any remaining value is then added to the pool value and reduced at a fixed rate for the remainder of it's value or untill its sold.

i understand this but others have said it increases the tax you pay the following years as it increases depreciation, this isnt true though is it? say you have an extra 10k depreciation on purchase the following year and your tax profit is for arguments sake 50k, you dont then add that 10k to your 50k do you? you just dont subtract any depreciation in the first place for your tax profit

 

[An Gof]

i understand this but others have said it increases the tax you pay the following years as it increases depreciation, this isnt true though is it? say you have an extra 10k depreciation on purchase the following year and your tax profit is for arguments sake 50k, you dont then add that 10k to your 50k do you? you just dont subtract any depreciation in the first place for your tax profit

You need to understand the difference between trading profit and taxable profit.

 

[Bossfarmer]

You need to understand the difference between trading profit and taxable profit.

trading profit allows depreciation as a cost to reduce profit, taxable doesnt? the point is if my depreciation increases the following years from a tractor purchase how does this affect the taxable profit surely you just dont subtract it to start with so no need to add back in?

 

[An Gof]

trading profit allows depreciation as a cost to reduce profit, taxable doesnt? the point is if my depreciation increases the following years from a tractor purchase how does this affect the taxable profit surely you just dont subtract it to start with so no need to add back in?

Your accountant will explain it to you

 

[D14]

trading profit allows depreciation as a cost to reduce profit, taxable doesnt? the point is if my depreciation increases the following years from a tractor purchase how does this affect the taxable profit surely you just dont subtract it to start with so no need to add back in?

You can depreciate at different rates as well.

 

[ollie989898]

I think that many of us have too much invested in kit. For me the most marginal piece of kit to own is a combine harvester. The price of the last one I bought (three years old) would paid for a contractor to do our harvest for ten seasons, factor in servicing, repairs, fuel, insurance and paying a driver and I start to look like a bit of a fool.

You would need to work out your two competing ideas on paper and in their entirety in the context of £/tonne in store dried and safely stored.

A contractor that doesn't turn up for a week could cost you £10/tonne in drying and handling costs very readily if you are obliged to harvest when grain is a bit damp.

 

[Lincsman]

trading profit allows depreciation as a cost to reduce profit, taxable doesnt? the point is if my depreciation increases the following years from a tractor purchase how does this affect the taxable profit surely you just dont subtract it to start with so no need to add back in?

Taxable profit is;
£100K profit, less £100k new tractor talking full allowances = no profit and no tax

Trading profit is;
£100k profit less £10k depreciation (reality) of new tractor = £90k profit

2nd year trading;

£100k profit less another £10k depreciation (reality) of nearly new tractor = £90k profit... that cannot go on tax return as the depreciation is Zero... its all gone, so add it back on.

At least thats how I understand it.

 

[Bossfarmer]

Taxable profit is;
£100K profit, less £100k new tractor talking full allowances = no profit and no tax

Trading profit is;
£100k profit less £10k depreciation (reality) of new tractor = £90k profit

2nd year trading;

£100k profit less another £10k depreciation (reality) of nearly new tractor = £90k profit... that cannot go on tax return as the depreciation is Zero... its all gone, so add it back on.

At least thats how I understand it.

so your back at 100k? which u would have bn had u bought the tractor or not

 

[Lincsman]

so your back at 100k? which u would have bn had u bought the tractor or not

Yes until you sell the tractor at 3 years old and your taxable profit is then £170K, ( or £210K if its a Fendt!) pushed down to £70K with the purchase of tractor 2, if you now have the cash to buy the tractor and pay the tax.

... I think?!

 

[Cowabunga]

Regarding ever increasing machinery costs.......

When will we reach the point at which it is more cost effective to replace all the fancy massive tackle with a yard filled with some friendly staff and a fleet of massey 135s.

the really lucky farms could have an international 1455 or even a 55 series John Deere to pull the direct drill.

well on the way to regenerative farming: socially, environmentally and economically?

It might be more practical to ask at what point will it become uneconomic to farm in the UK. At what acreage will the average mixed or arable farm be able to sustain two farming families? Or one?

In practice I believe we are at a point where perhaps the majority are only marginally making a good financial living from farming and some of them may not achieve this consistently from year to year. The vast majority of farms are classified as 'micro businesses' and the threshold for being viable continues to rise over time because costs rise far faster then unit output value and has done fairly consistently for the forty years at least.

 

[Cowabunga]

Depreciation is a notional cost that is deducted from your profit to show a more accurate position what your business net worth is accounting for the loss in value of the asset's. But it is not tax deductible so is added back to your profit for the tax calculation.
HMRC allow you capital allowances for asset's brought which you can then deduct from your profit which are at a different rate then the calculation for depreciation. And you can claim 100% tax relief up to a certain amount on asset's brought in the first year, any remaining value is then added to the pool value and reduced at a fixed rate for the remainder of it's value or untill its sold.

Yes. The taxman only gets you when you sell the old equipment for whatever it is worth and likely to be more depreciated on the books. The difference is taxable.

I may be missing something there, because some posters claimed several times that the taxman gets you in the second year if I understood them correctly. I don't understand how that could be unless the machine was highly depreciated for capital allowance on the books in the first year and sold at a massive notional profit the next financial year. Have I misunderstood something or got hold of the wrong end of the stick?