Farming Investment Fund
Tuesday, 02 November 2021
The ‘Farming Investment Fund’ is due to be launched officially this autumn. Its main aim is to help farmers and landowners to invest in their business, improve profitability and achieve greater environmental benefit.
The fund itself is being split into two parts. One part of the fund awards grants of lower value and the other part awards grants of higher value.
The lower value investment part of the fund is called the Farming Equipment and Technology Fund.
The higher value investment part of the fund is called the Farming Transformation Fund.
Farming Equipment and Technology Fund (FETF)
The FETF will focus on the smaller grants to boost business performance, whether this is through new equipment, new technology or small infrastructure investments. It appears to be based broadly on the Countryside Productivity Small Grant (CPSG), which allows grant funding claims of 40%, from a minimum of £3,000 to a maximum of £12,000.
The improvement in the FETF scheme will be that contractors will be eligible to apply, which wasn’t the case in the CPSG.
It seems probable that the new equipment will be subject to a set list which the Government is currently working on.
Another improvement is that you’ll be able to make an application online, quickly and simply. The approval process will be straightforward, with a clear grant value assigned to each item.
If an application is successful, the applicant will buy the item and then claim the reimbursement using their receipt. This means that applicants must make sure that they’ve sufficient cash flow to fund the original purchase before being reimbursed.
Farming Transformation Fund (FTF)
The FTF is aimed at the larger, more complicated, and higher costing investments. The scheme itself has been based on the Countryside Productivity Large Grant (CPLG) scheme, which historically supported water resource management, adding value to agri-food and improving farm productivity.
A government blog, published earlier in 2021, outlined some of the areas where farmers and landowners may be eligible for a grant:
on-farm water storage infrastructure, including reservoirs
precision agriculture equipment (for example, low emission and variable-rate nutrient or pesticide application)
robotic or automated technology
equipment and technology for storing, sorting, or processing products
From my initial reading, there’s likely to be a two-step process. This will include the Expressions of Interest (EOI), followed by a full proposal, which will go on to be assessed (and hopefully approved).
They’re aiming to use an online eligibility checker for the FTF, to improve the overall application process.
If the scheme follows the same pattern as the CPLG, then the minimum grant is £35,000, which would be a maximum grant of 40% of the total project costs. Remember though, these grants are usually paid in arrears and businesses must be able to manage the knock-on effects to their cash flow when completing the project.
For example, to claim £35,000 in grant funding, the business would need to fund expenditure of £87,500 (plus VAT) before being able to submit their claim.
Also, business owners will need to bear in mind the possibility that claim dates may be fixed.
Overall, the cash flow risk should be a hurdle that businesses can overcome with sufficient planning and discussions with their bank. The output of any small or large investment would be expected to be positive and to improve the efficiency of the business.
For companies, investment in new plant and machinery is attractive with current super deduction available at 130% of total cost. To reiterate, this is only NEW plant and machinery. This super deduction isn’t available for sole traders or partnerships; nonetheless, tax consequences shouldn’t deter any business from investing because the commercial decision must always come first.
If you’d like to discuss any future opportunities for your business or cash flow implications, or if your bank wishes your accountant to review the financing of a project, we’re happy to help. Please speak to your usual Larking Gowen contact or email email@example.com
** POST PUBLICATION NOTES:
The DEFRA government website has been updated (2 Nov) since this article was written, you can click here to view.
The guidance was issued (16 Nov) and can be found here.