I am looking for some guidance in how to deal with grant income from the rural payments agency and whether capital allowances are allowable - any guidance and/or direction is gratefully received.
Income is mainly from grants, BPS from RPA, single payment scheme for higher level stewardship & from letting of stables (he does not operate this activity). Having looked at BIM85640 '‘Farming profits’ are the income generated by the care of livestock, growing of crops and associated income from farming related grants received. It excludes non-farming income from the rental of land, buildings, equipment or non-farming investment income from company dividends, interest or similar receipts'. My investigations have found that the grant income needs to be assigned either a revenue or capital, I believe that as this income is not for a specific purpose so is revenue in nature.
The previous accountant added the income into 'other taxable income or benefit, which you have not already entered elsewhere in your tax return' box 15 - 18 TR3,SA she allowed both revenue and capital expenses against this, though no loss was carried forward on the return, just a straight income less expenditure = nil. Is this correct? Or am I able to treat the income as per BIM85640, farming income? Are capital allowances allowed against the income like normal trading? I realise that the 5 yr rule will apply in regard to this income as the grants will never produce a profit, is this perhaps why the grant income has been treated in this way.
I am not looking to find fault with how this has been done previously, it is not my specialist area and just want to make sure I do this propertly, the previous accountant was a little unsure. Thanks