Commentary

B5.107 Farming expenses

Business tax
Business tax | Commentary

B5.107 Farming expenses

Business tax | Commentary

B5.107 Farming expenses

The ordinary rules for computing trading profit apply to farming and market gardening1. Problems can arise in determining whether particular expenses are regarded as capital or revenue expenditure, and whether certain expenses are deductible in the computation. Until 5 April 2011 capital allowances were available for capital expenditure on agricultural or forestry buildings and works (see Division B3.5). Whilst the deductibility of expenditure is decided on general principles (see Division B2.3), the commentary below may be helpful when considering certain farming expenses.

Farmhouse rents

Where a tenant farmer pays farmhouse rent in respect of the entire farm, it is important to distinguish between the proportion which relates to the farm land (which can properly be deducted as an expense wholly and exclusively incurred for the purposes of the farming trade2) and that which relates to the farmhouse (which is allowable only to the extent that it relates to business use). The proportion of rent that relates to the farmhouse depends on the facts of each case. HMRC do not generally accept that the part of the rent relating to the farmhouse is represented by the difference between value of land without a house and the value of land with a house. Nor do they generally accept that the farmhouse rent is equal to an amount of rent commanded in the open market by

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