Client Case Study – Bapton Manor Farm Limited


Bapton Manor Farm invest in new grain store


Last year James Lyall, of Bapton Manor Farm Limited, made the decision to invest in a new on farm grain store to reduce third party storage costs, speed up harvest and have more control over the timing of grain sales.


Further to the abolition of Agricultural Buildings Allowances (ABAs), the building element of the project would not directly receive any Corporation Tax relief so James discussed the project with Mike Butler at Old Mill to see what could be done to make the investment more tax efficient.


Mike discussed the various options available to James and set out the mechanics of using a company pension fund to finance the building element of the project, leaving the company to finance the fixed plant and fixtures, (in this case the grain dryer and associated handling facilities). The overall strategy resulted in the entire cost of the project benefiting from Corporation Tax relief.


Once the idea was agreed, a plan was put together to maximise the benefits available to the business. In order to minimise the level of bank borrowing required to


finance the project, James’ personal pension funds were transferred into the newly formed company pension scheme, providing initial capital to purchase the land where the grain store would be built. There are several restrictions in place under current legislation in terms of what an individual or company can contribute to a pension scheme each year, therefore, contributions were paid in to the company scheme either side of the tax year end. This, together with utilising the unused allowances from the previous three years, under pension legislation, facilitated enough money to be available in the company pension fund to commence with the building project.


The tax savings from this forward planning were significant. The contributions to the pension fund resulted in no tax liabilities in the year of the building work. The allowances that were claimable by the company on the fixed plant, enabled a claim to recover all of the tax paid in the prior year. The balance of the allowances that were available going forward resulted in little tax being levied in the following year.


Mr Lyall said: “Overall the strategy formulated by Old Mill has proved to be very beneficial for the business. The tax burden we faced from the strong profits achieved on the 2011 harvest sales has been completely eliminated. Also, the tax paid from the 2010 harvest sales which has now been refunded, has been a great help in terms of cashflow whilst we are faced with the challenging conditions of the current season.”


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