A new playtoy - 181/2 Tractor

visatorro wrote: »

135 acres and plenty of water

For now anyways

Dunedin wrote: »

Similar situation to yourself here. Paying 52% tax from off farm income. Bought new Case 105u in 2015. Got €25k on trade in and new tractor was €60k

Wiped out most if not all of tax bill and I have the comfort of a new one.

That's the way to do it

patsy_mccabe wrote: »

If you wiped out most of your tax Bill, then your farm income is zero. You are basically working the farm for nothing. Would the money not be wiser spent on something else.

more likely a profit before you take depreciation of tractor and sheds etc into account?

Perhaps one of the accounting guru's / lakhill etc can clarify but my understanding around the trade in part of buying a new tractor is as follows.

Say a new tractor costing €80k and trade in is worth €30k. Finance €50k over 5 years say repayments are €12k pa. (€10k principal and €2k interest)

Depreciation or w&t capital allowances of the cost price allowed over 8 years so €10k pa plus the 2k interest means 12k off taxable income saving you aprox €6k tax if at the high rate, however you still need to find the other €6k cash to meet the new loan repayments.

Problem is in year 1, you have traded in a tractor worth €30k. If you have had this tractor for 8 years then its fully depreciated or worthless on paper. So when you trade in and get €30k for it thus is a gain or income of €30k in year 1 and taxable at top rate presumably. So income up €18k (30-12) in year 1

I don't think you can net off the figure ie €50k over 8 years, mentioned it to an accoutant once and she said no way. How are fellas getting around this or are they .just paying the tax?

Grueller wrote: »

My accountant told me that youwould just claim the allowances on the €50k. I must quiz him again though in light of what you just said.

Would you mind posting his response up here as I'd like to know for my own purposes. Thx.

What is wrong with the trusty TM?

roosterman71 wrote: »

Thanks for all the info so far folks. Few recommendations in there. Anyone care to share their experiences with any of these yokes?

Very happy with the case. 105hp so does anything I need it to do and still tidy in the yard. Good spacious cab too.

Buford T. Justice V wrote: »

I've a JD100R with an H240 loader. Does exactly what it says on the tin. Enough power for me and a nice tight turning radius. Get the external lift controls for the lift arms and PTO, very handy for hooking up and spreading slurry. Plenty of space in the cab for me but can be a bit tight with an adult in the passenger seat. Also get the extendable hitch, I didn't spec it and am sorry now.

One downside for me is the sluggish response to the shuttle, I have the speed control up to max but it's still too slow, imo. Saying that, it may be normal for all tractors with shuttle but she's due a service this coming week so I'll be bringing that up with the mechanic. Half sorry I didn't go for the H260 as the extra reach would have allowed easier stacking of 4x4 round bales of straw 4 high but it's a minor enough problem atm.

+1 on the push out hitch. I would have thought the external lift and pto controls were standard on all new ones???

I’d also strongly recommend air con. It means that no matter how hot the weather is, you can stay going, very important when at silage or hay in the summer. A neighbor of mine with a similar tractor has to park up for a few hours as he can’t stick the heat in the cab at peak times

Grueller wrote: »

My accountant told me that youwould just claim the allowances on the €50k. I must quiz him again though in light of what you just said.

That's incorrect approach

lakill Farm wrote: »

OK depreciation is not a factor at all.

Capital allowances is the factor and its currently at 8 years or 12.5% PA

So new tractor of 80k the capital allowance is 10k per annum and it is favourable now because you can claim Capital allowance in excess of farm profit against some off farm incomes such as PAYE.

the 2k interest goes towards Profit and loss as an interest

Now if your 30k trade in tractor has 30k capital allowance claimed you are caught for a 30k balancing charge at tax rates

Sometimes the dealers will ask what the carrying value/ book value and they adjust the prices to suit but you still pay the same difference to trade up

Ok, so the trade in allowance over the book value of the machine is taxable as a balancing charge / income in year 1. Thx for that.

If someone was to finance the same scenario via lease rather than HP or loan, ie trade in worth €30k, €50k lease over 5 years, can the full €30k trade in be taken as a lease payment in year 1?.

I know that lease presents a problem down the line when finance term is up, but this can be reduced / eliminated by use of secondary leasing period?

jimmy G M wrote: »

Ok, so the trade in allowance over the book value of the machine is taxable as a balancing charge / income in year 1. Thx for that.

If someone was to finance the same scenario via lease rather than HP or loan, ie trade in worth €30k, €50k lease over 5 years, can the full €30k trade in be taken as a lease payment in year 1?.

I know that lease presents a problem down the line when finance term is up, but this can be reduced / eliminated by use of secondary leasing period?

No the 30k would not classified as a lease payment. It is a deposit and that’s how it will be wrote into the lease anytime I have seen it.

You will run into the above balancing charge issues again if applicable

roosterman71 wrote: »

I'm gonna go to Grass and Muck next week in Gurteen and have a chat with the different lads there and see how these things look in the flesh.

Do dealers give ya a chance to take one for a day or 2 to work it or is it the same as cars and you just get a quick spin down the road?

You'll def get a spin down the road anyways but some dealers shy away from prolonged demos as the tractor come back wrecked.

Seen this with my own eyes one time. Salesman asked me how long I reckoned the farmer had the tractor on demo. I said 3 days but apparently he had it 6 hours. I honestly can say I'd be ashamed to give it back in the condition it was in

josephsoap wrote: »

Hi Lakill

Perhaps you could clarify if a commercial jeep is treated the same for tax purposes?

For example if I buy a 2 year old Landcruiser for ~35,000, per my calculations this will reduce my taxable income by €4,375 as an capital allowance for a period of 8 years?

Thanks

Joe

Ye capital allowance will be 35000 x 12.5% per annum for 8 years