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Economics of buying a new Tractor

Silverdream

I know folks would advise buying one with a few years up as they would be a lot cheaper, but I cannot see the value in second hand Tractors, the prices have sky rocketed to the point that I'm think I'd be as well to buy new. I've a few questions with regard to buying a new Tractor,

first is the VAT, I'm not VAT registered but can I still claim the VAT back?

Is there straight prices vs trade in like with Cars?

I guess I can depreciate the value of the Tractor over 8 years, (12.5% per year) but can I use a longer or shorter time frame?

Also with regard to the depreciation am I correct in say I make 20k profit on the farm so saying a 70k tractor I'll have 8750 as an expense so now my profit is 11250

Finally I'm finding it hard to get list prices of Tractors, is there any publication that has a list?

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SodiumCooled

https://www.boards.ie/discussion/comment/121738807#Comment_121738807

No VAT means there is no VAT to be paid and the the price advertised is what has to be paid. Even if VAT registered you still have to pay the full advertised price.

My understanding is that once something is bought by a non-vat registered farmer/person then the VAT element is never seperable again and it will always be sold on with no VAT to be paid or reclaimed.

Jb1989

Most of Northern Ireland farmers are vat registered and they are surprised to hear the southern boys are not.

Bass Reeves

Very hard to dodge the vat on resakebof registered equipment such as tractors or similar equipment that can be registered for motor tax.

It more likely to happen on a livestock box or implements. However you could be completely out of luck and the person that bough it off you might have an audit.

Personally if I am buying something off DD I always keep a copy of the add if I have to pay cash

Bass Reeves

https://www.boards.ie/discussion/comment/121739289#Comment_121739289

Yes unless the vat is claimed when new there is no vat on that item again. Tge law regarding that was changed a good while back.

Donald Trump

I often wondered if you could get away with setting up a separate company registered for VAT, and then "hire" that company to do your work.

You'd be billed + 13.5% VAT on the work, but for bigger lads with a lot of machinery, it might make sense. It would also insulate that end of things from your overall farm (although that in itself might leave it harder to get loans).

Tonynewholland

https://www.boards.ie/discussion/comment/121739387#Comment_121739387

Some farmers in companies are doing that. They’ll have the machinery in a family members name.

SodiumCooled

https://www.boards.ie/discussion/comment/121739387#Comment_121739387

I am pretty sure you can be VAT registered in a trade say and keep the farm out. Certainly scope for getting some items applicable to both though the trade (jeep, builders trailer etc) but stuff like tractors would be a major red flag. Then if you have a trade that has to be VAT registered probably best to just have everything VAT registered and put everyting against VAT as I'd imagine you would be high on the audit list in the scenario above.

Tonynewholland

https://www.boards.ie/discussion/comment/121738725#Comment_121738725

What part of what I said was incorrect.

KAMG

https://www.boards.ie/discussion/comment/121739444#Comment_121739444

Every single bit of it.

Donald Trump

https://www.boards.ie/discussion/comment/121739433#Comment_121739433

I meant as in setting up SodiumCooled Ltd purely as an agricultural hire/contracting business. Buying all your machinery through them and then billing your farm for work which coincidentally matches up with SodiumCooled Ltd costs and repayments. Where you would be SodiumCooled Ltds only customer. Obviously wouldn't be applicable for grant aided machinery. Any savings would only be due to VAT rate differentials.

What you are talking about is lads who already have a company, buying stuff for the farm through it but paying for it with (and writing it off against) income from that other company.

AntrimGlens

https://www.boards.ie/discussion/comment/121739332#Comment_121739332

Livestock for human consumption are Zero rated up here for VAT and our VAT rate is 20%. Everything and I mean everything here is claimed back for VAT, Vets, drugs, diesel, fertiliser, Mart fees, quarry stones, machinery hire, phone and anything in between. It's an extremely simple procedure since they went digital a couple of years ago, an hour every quarter and all you have to do is submit an excel sheet to HMRC and it's repaid to your back account in a matter of days. Would be some hit not to be able to claim it back.

KAMG

If you want to get full tax relief on the new tractor, costing €80,000, all you have to do is keep the first tractor.

But then you have to fork out 35,000 more. Some people might prefer to do that but most don't have the luxury of having 2 good tractors on the farm.

So, why should you get tax relief on the full €80,000 tractor is you are only forking out €45,000. Makes so sense. The deferring of the balancing charge of 35,000 is a concession. Its not to be abused.

Bass Reeves

https://www.boards.ie/discussion/comment/121739387#Comment_121739387

Technically it would not be worth a lot to you, most lads doing that are involved in a bit of contracting as well. You have to put enough back into the company to pay off any loan or the cash value of the machinery anyway and pay extra accountancy fees.

80K tractor vat = 15k ( tractor 65040 net)

To pay the 65k back into the company @13.5% vat =73 820

However if you borrowed 50K@7% over 5 years it's 8750 vat on that going into company adds another 1150 euro to the bill.

Net savings would be about 5k less accountancy fees

As well you would lose the ability to freeze the depreciation if it suited as against that you could write the tractor costs off faster against the farm if it suited

patsy_mccabe

Farmer Phil put up a video yesterday of the Fleming Company, that make the various farm machinery. Watch the video from 26 mins on, he talks about how they are still playing catch-up from the effects of Covid. I'd imagine it's teh same with all tractor manufacturers. This has led to the crazy prices for secondhand ones. ...... or is it just wishful thinking on my part.

A "FLEMING" GOOD TRAILER THAT!!!!! (youtube.com)

Jb1989

https://www.boards.ie/discussion/comment/121739612#Comment_121739612

Straight from the horses mouth there antrim. Hmrc could teach the irish revenue a thing or two.

Also how you find having a government once again antrim?

Tonynewholland

https://www.boards.ie/discussion/comment/121739518#Comment_121739518

please show me all the incorrect parts so.

mr.stonewall

@KAMG what way does it work for a farmer who would become vat registered and may be trading a vehicle or a piece of machinery for a newer model.

On a side note, I really enjoy and value your contributions here

KAMG

https://www.boards.ie/discussion/comment/121740653#Comment_121740653

Thank you mr.stonewall.

I do my best to offer good advice.

In that case, they can claim VAT back on the full amount of the new machine. But as they did not claim VAT on the first machine, they do not have to pay VAT on the trade in proceeds.

AntrimGlens

https://www.boards.ie/discussion/comment/121741452#Comment_121741452

Yeah, they've been submitted for the past two years digitally, don't need an accountant or anything to do it, just a piece of free software is all that's required.

AntrimGlens

https://www.boards.ie/discussion/comment/121740067#Comment_121740067

Ah our new Dept Ag Minister has never got his hands dirty in his life. Guess where his first media engagement was the day after he was elected into office? Maybe he visited a farm to see how they're coping with slurry during the wettest year in decades, Nope, did he visit a farm to hear about the devastating effects of Tb, Nope again; did he call to a mart to hear about why farmers are protesting across Europe about high energy costs and carbon taxes. Nope wrong again, he called to the RSPCA offices to see wee tabby the stray cat and poppy the abandoned poodle.

I've nothing against any animal but I doubt they would have been my priority for my BIG first public engagement. I think this will tell us a lot about where farming will be on his agenda in the next number of years!!

leoch

Who is the new ag minister

older by the day

I was chatting to my wife last week, about what we would do if she won the lottery (i don't ever do it as I would be afraid I'd win, it would ruin the children).

I personally wouldn't take a brand new tractor because of the level of guilt. Scratch the paint, crack the mirror, going in to the new cab, with wet and slurry on you.

patsy_mccabe

https://www.boards.ie/discussion/comment/121753163#Comment_121753163

Years ago when the lotto came out first, I asked an uncle of mine what he'd do if he won the lotto. His reply was - "Ah, I'd still eat the same loaf of bread in the morning".

DBK1

https://www.boards.ie/discussion/comment/121753305#Comment_121753305

Like another farmer said one time, “if I won the lotto I’d stay farming away until it’d be all gone!”

VPNNoobie

Is VAT included when writing down over 8 years?

Say 8k purchase including VAT, is the depreciation 1k per year?

White Clover

https://www.boards.ie/discussion/comment/121757407#Comment_121757407

Yes, if you are not VAT registered.

hopeso

https://www.boards.ie/discussion/comment/121753163#Comment_121753163

The question there is, why are you covered in wet and slurry if you've won the lottery?

straight

https://www.boards.ie/discussion/comment/121758166#Comment_121758166

Because he's a farmer. He could sell the farm and it would be like winning the lotto but he wouldn't be happy without the wet and sh1t.

Silverdream

I notice all the new Tractors have the ad-blue, whats the story with this, does it add much to the cost of running the tractor, does it make it more fuel effcient?

I'm thinking of at a new Claas Arion 420, anyone have them, good or bad thoughts?

minerleague

https://www.boards.ie/discussion/comment/122209330#Comment_122209330

Know nothing but see arion 410 with 130 hours for sale with john deere dealer TFM ( clonmel ? ) Seems to be discount over new price?