Park McKillop & Company - Tax relief for farmers

• Tax planning and compliance
• Improve and grow your business
• Accounting and auditing
• Specialist sectors
• Business start-ups
• IT and accounting systems
• Free initial consultation

26 September 2013

Can tax relief be claimed on sheds?

It is well known that HM Revenue and Customs are very strict on the tax relief available on sheds and buildings which mean farmers can spend a significant amount of money on which little tax relief can be claimed.  But is this about to change?

HMRC Stance

The Capital Allowances Act 2001 Sections 21 and 22 and HMRC guidance notes CA22000 state clearly that sheds and buildings are structures and therefore do not qualify as plant for capital allowances and annual investment allowances (AIA’s).  CAA01/S21 states:

‘Do not give PMAs on expenditure on the construction or acquisition of a building or an asset which:

1. is incorporated in a building,
2. although not incorporated in the building (whether because the asset is moveable or for any other reason), is in the building and is of a kind normally incorporated in a building, or
3. is in a building and is in the list below.
   1. Walls, floors, ceilings, doors, gates, shutters, windows and stairs
   2. Mains services, and systems, for water, electricity and gas
   3. Waste disposal systems
   4. Sewerage and drainage systems
   5. Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed
   6. Fire safety systems’

Recent changes

FA2008 introduced a new classification of integral features of a building or structure which qualifies for allowances at the 10% special rate.  This means some of the components within the shed and buildings which previously would have been denied allowances are now open for tax relief.  They also qualify for the 100% AIA up to limit of £100,000.  This limit is being reduced to £25,000 from 1 April 2012 for businesses within the charge to CT, and 6 April 2012 for businesses within the charge to income tax.

Another development is the treatment of moveable sheds.  HMRC states that if the shed is intended to be moved in the course of the trade, and they pass the normal plant tests, plant and machinery allowances should be due.  CA22110 states that poultry sheds which are moved for hygiene purposes will qualify as plant.

Summary

It is important that careful planning is carried out to ensure maximum tax relief is claimed on farmer’s expenditure.   Please contact us on 028 2565 0384 for advice on what you can claim.