Unlock Tax Advantages for Your Production Herd: A Guide to Herd Basis Elections

05 June 2024

We originally published this post on the ‘herd basis elections‘ on 16 December 2013 and updated it on 5 June 2024 for freshness, accuracy, and comprehensiveness.

Are you a farmer or business owner who raises animals for their products, like dairy cows, breeding ewes, or even fish? If so, you might be eligible for a tax benefit called the herd basis election. This can significantly impact your bottom line by reducing your tax burden.

What is it?

It’s an accounting method that treats your production flock as a capital asset, similar to machinery or buildings, instead of trading stock. This means the initial purchase cost of your animals isn’t tax-deductible, but the expenses associated with maintaining your flock, like feed and veterinary care, are. Additionally, any profit you make when you eventually sell your mature breeding animals is generally considered tax-free.

Who Can Use It?

It is available to various business structures, including sole traders, partnerships, and limited companies. However, there are some key things to consider:

  • Statutory Time Limits: There’s a strict timeframe to elect for the herd basis, typically soon after you start keeping a specific type of production animal. Missing this deadline can disqualify you.
  • Irrevocable Decision: Choosing the herd basis is a permanent decision. You cannot switch back to treating your herd as trading stock later.
  • Mature Animals Only: Only mature breeding animals qualify. This includes females who have birthed offspring and males used for breeding.

Planning for Herd Basis Elections with Farming Accountants

The herd basis election offers significant tax advantages, but it’s crucial to carefully consider its implications before making a decision. Consulting with farming accountants familiar with agricultural tax rules is highly recommended. They can help you assess if the herd basis is the right fit for your specific situation and ensure you meet all the requirements within the designated timeframe.

Green & Co, for example, are experts in farming and agriculture. Their team of qualified accountants can provide tailored advice to optimise your farming business’s profitability.

By understanding the herd basis and its eligibility criteria, you can unlock potential tax savings for your production flock. Remember, careful planning and professional advice from farming accountants are key to maximising the benefits of this valuable tax election.

Ready to explore how your farm could benefit? Contact Green & Co today for a free consultation!

Nick Park FCCA,Director
Herd Basis Elections - Farmers tax strategies

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