Agricultural buildings

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Agricultural buildings
  • Definition of plant not building
  • Capital allowances planning
  • Agricultural buildings let out
  • Letting out cottages and converted agricultural buildings
  • The importance of repairs and improvements to agricultural buildings
  • Was the agricultural building there before?
  • IHT considerations
  • Redundant agricultural buildings
  • Action plan

Agricultural buildings

Definition of plant not building

A large amount of expenditure in relation to a modern building relates to items of plant and machinery. The farmer or landowner may identify such expenditure and claim the appropriate capital allowances and annual investment allowance (AIA) in accordance with the rates available. These are generous with the AIA limit at a temporary level of £1,000,000 to 31 December 2021. All appropriate conditions must be met. See the Annual investment allowance (AIA) guidance note for more information.

The ability to claim AIA on plant applies as much to a second-hand building as a new one. It can be quite normal practice for farmers to buy second-hand barns. The apportionment between the categories depends on the valuation techniques and requires knowledge of building construction.

The ‘after-tax’ cost of funding a new diversified venture will be affected by whether expenditure is treated as buildings or plant. There may well be borderline cases where planned expenditure could be regarded as plant. However, there are certain items of expenditure where the legislation is clear as to what it deems to be plant alterations to buildings incidental to the installation of plant.

HMRC has agreed that silage clamps and slurry pits qualify as plant and machinery. With nitrate vulnerable zone legislation placing more pressure on the farmer to have increased storage capacity, this is a useful area of tax planning when introducing new silage clamps and pits.

Items that are buildings or structures may qualify for the structures and building allowance depending on the qualifying conditions as set out in the Structures and buildings allowance guidance note.

Capital allowances planning

It can be seen that a lot of new building work can classify as plant, and again the tax planner must be involved before the building is built to ensure maximum tax efficiency from both a timing viewpoint and also the classification of plant and machinery. However, negative tax guidance was given in the case of Rogate Services

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