Farmers and landowners should make the most of financial incentives to improve and diversify their businesses, says land agency firm Strutt & Parker.

The increase in Annual Investment Allowances (AIA), low interest rates and competitive farm loan rates mean this could be a perfect time to consider capital investment in farm and estate infrastructure.

Mark Herrod, associate in Strutt & Parker’s Harrogate office, said: “One of the most significant announcements in George Osborne’s Autumn Statement last year was the change to Annual Investment Allowances (AIA). In 2012, the AIA was reduced to £25,000 but this has now been increased ten-fold to £250,000 and is set to remain at this level until January 2015. As a result, this could be a perfect time for landowners and farmers to consider investing in capital purchases around the farm.

“The Bank of England has also confirmed its intention to maintain the basic rate of interest at 0.5%, which has been static since March 2009, and according to various economic experts this is likely to be the case into 2014.

“Additionally, banks and lending organisations are gradually becoming more amenable when it comes to lending to farmers and landowners, increasingly seeing investment in farming and established land-based businesses as a relatively secure option,” said Mr Herrod.

“The Agricultural Mortgage Corporation (AMC) offers competitive rates on funding for land or property purchases, and capital projects including the construction of buildings, plant and machinery, storage facilities, business expansion strategies and diversification schemes.”

He added: “In certain cases, competitive interest rates, along with attractive AIAs can help with renewable energy schemes. When coupled with the fact that government schemes such as the Renewable Heat Incentive and Feed-in Tariffs look to be set until 2014, the incentives for investment in renewable technology are currently pretty good.

“Biomass district heating schemes are a good example: although the initial capital investment is large, the returns from the RHI and heat sales can give an attractive return and the initial investment may be eligible for the AIA which will enable up to £250,000 to be offset in the first year.

“With weather patterns increasingly difficult to forecast, the value of being able to store crops, dry grain and house livestock under cover for longer periods is increasing significantly. Many producers, whether livestock or arable, are now appreciating the positive impact that modern buildings can have on enterprise profitability and the combination of capital allowances and competitive funding can mean that on-farm efficiencies can be achieved economically and effectively.

“With many businesses at the start of a new financial year, these excellent incentives could mean a fresh approach to capital investment and a successful 2013/2014 for landowners and farmers.”

For further advice please contact Mr Herrod in Strutt & Parker’s Harrogate office on 01423 706786.