In this article, we explain how to maximise Capital Allowances on farm buildings.
Building new farm buildings or extensions can be costly, but taking advantage of the available Capital Allowances can provide significant tax relief. By understanding qualifying expenditure, leveraging and maintaining detailed records of expenditure, farmers can effectively reduce their tax liability which in turn reduces the overall cost of their investment.
Below, we highlight the different allowances available for expenditure on building or extending farm buildings.
Plant and machinery allowances (PMA)
Businesses can claim plant and machinery allowances (PMA) for qualifying equipment. This includes items that you keep to use in your business, as well as parts of buildings (including farm buildings) considered integral features. Costs for building alterations to install plant and machinery also qualify (not including repairs).
Find out more: Plant and machinery allowances (PMA).
Structures and buildings allowances (SBA)
Structures and buildings allowances (SBA) can be claimed for costs of the purchase, construction, or renovation of non-residential structures and buildings (including farm buildings). The SBA allows you to claim 3% of the qualifying expenditure per year on a straight-line basis over 33.3 years.
Find out more: Structures and buildings allowances (SBA).
Annual investment allowances (AIA)
Annual investment allowances (AIA) let you to deduct 100% of the cost of qualifying plant and machinery from your profits before tax up to £1 million each accounting period.
Find out more: Annual investment allowances (AIA).
Specialist buildings
Legislation and case law have determined that certain expenditure on specialist buildings, such as slurry stores/silos for temporary storage, may be eligible for higher rates of plant and machinery allowances if they serve an active purpose integral to the business operation, constituting business apparatus.
What happened to the Agricultural Buildings Allowance (ABA)?
The Agricultural Buildings Allowance (ABA) was a historic type of tax relief available for expenditure on the construction of farmhouses, farm buildings, cottages, fences, or other works on agricultural land.
As part of the Finance Act 2008 reforms, the ABA was abolished and phased out between April 2008 and April 2011.
How Leyton can help
Planning on investing in new farm buildings or modernising existing structures? If you’re not sure which elements qualify for Capital Allowances, we can help.
Capital Allowances are an extremely valuable relief and can reduce your tax liabilities significantly, yet are often overlooked or underclaimed, so specialist advice is key. Our team of experts can provide support to help you make the most of the tax relief available.
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