A recent tax tribunal case (Stephen May v HMRC 2019) was decided in favour of the tax payer, who successfully argued that his purpose built grain drying and storage facility was a “silo used for temporary storage” under the provisions of the Capital Allowance Act 2001 and qualified as plant and machinery for tax purposes.
This is a very significant case in this area as HMRC have always historically contended that such structures are considered buildings, not plant. Claims for relief under the plant and machinery provisions have been limited to relief primarily for items of mechanical equipment within the building, thus denying relief under the plant and machinery definitions for the main structure of the building which typically represents the vast majority of the cost.
The building in question was specifically designed for the purpose of drying and storing grain with an integrated ventilation system, reinforced walls and specialist flooring. These features made it significantly more expensive to construct than a standard agricultural building and rendered the building unsuitable for any other agricultural purpose such as the housing of livestock. The tribunal concluded that the building dried and conditioned grain and that all of its components, including its structure, were integral to this function and that the entire structure constituted business apparatus.
The case is potentially good news for farmers who have recently constructed a grain store or who are about to do so. It does not mean however that every store will be eligible for plant allowances as this case turned on its facts and the fact that the building had specific design features which meant that it performed functions beyond that of a normal building.
Any farmer who has built a grain store in the past 10 years should look back at the expenditure to ascertain whether an additional claim for plant allowances is now possible under the new case principles. This will depend largely on the specification of the building, the timing of the original expenditure and what tax relief was claimed previously.
For those about to incur expenditure the case could prove very beneficial. With the current £1 million per annum annual investment allowance, it may be possible to fully relieve the entire cost in the year of expenditure if the structure qualifies as plant.
Streets have a dedicated capital allowance team who can assist you in reviewing your current or historic grain store spends to ensure any tax relief available is maximised.
For more information please contact Chris Connor by emailing cconnor@streestweb.co.uk or call 01522 551200
