Digging a hole for the Tax Authorities is fun

The income of arable farmers and dairy farms has been fine in recent years, but is now under severe pressure due to significantly lower crop prices and ever-rising costs. As a result, it can be quite difficult to maintain sufficient liquidity and pay bills on time.

A good liquidity position is essential to absorb financial shocks without immediately running into trouble. Asking the bank for additional credit is a logical step. But those who are creative can do more to boost cash reserves than you might expect at first glance.

Sharp on costs
Let me start simply: "What you don't spend, you don't have to earn." If you are serious about your profession, you must keep a close eye on all types of expenses. That is, incidentally, different from false frugality. Another, probably less well-known, is optimal tax loss planning.

By cleverly managing your results—for example, through VAMIL depreciation or classifying necessary expenses as maintenance—you may be able to create a tax loss. Good years result in tax payments, and with a deductible loss, you can arrange a refund. Through a so-called "carry back," tax paid in previous years for both income tax and corporate tax can be reclaimed.

Leasing back equipment 
Another possibility could be the sale & leaseback of tractors or other equipment. In this case, you sell machines to an external party and simultaneously lease them back. A variation on this is trading in your machine for a new one, where the trade-in value, except for the down payment, is deposited into your account. You pay for the new one via lease installments, for which competitive offers are currently being made. This provides immediate liquid funds, while you can continue to use your machines as usual—perhaps even more modern and better ones, for a monthly lease fee.

Entrepreneurs who prefer welding to leasing will want nothing to do with the latter option. That is perfectly fine, of course; one option appeals more than the other. But in any case, serious work on proper liquidity planning is essential. It is of the utmost importance to continue paying bills on time, and that requires thinking outside the box. Not paying, or paying much too late, is far too expensive, both now and in the future. Let’s work together to ensure the cash reserves are sufficiently replenished.

Jasper Carpenter

Jasper Timmerman is a senior advisor at Farmers Funding & Advice. He specializes in tax optimisations, restructuring, business transfer, family business and financial guidance.

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