Are farmers’ grain stores eligible for tax relief?
Wednesday, 12 February 2020
The question of tax relief on farmers’ grain stores has puzzled practitioners for some years. The structures and buildings allowance may now be available for new buildings, but relief is limited to 2% a year. Agriculture plant and machinery allowances can provide up to 100% tax relief within the annual investment allowance, but buildings generally are not eligible.
Exception for silos
There is, however, a specific exception for silos used for temporary storage and the prudent view has been to claim full plant and machinery allowances on specifically constructed structures such as cold stores or potato stores, where the building itself fulfils a function. Where a general-purpose building can be used as an on-floor grain store, the claim has normally been restricted to the value of the processing machinery which is incorporated into or used within the structure.
What is a ‘silo’?
The case of May v HMRC, which came before the First-tier Tribunal in November 2018, could give better guidance. Mr May erected a purpose-built grain store designed to dry and condition the crop using external and pedestal fans, both temporary and permanent grain walling, heavy duty exterior walls and low headroom. As such, the building was not suitable for general agricultural use.
HMRC sought to disallow the claims, taking the view that the building was not a silo for temporary storage, and that it was a building rather than a processing facility.
The tribunal disagreed, noting that the structure met the dictionary definition of a ‘silo’, and it was specifically designed not only to store grain but also to dry it and to maintain it in marketable condition. The movable equipment and the building together constituted an item of processing machinery, not just a building in which processing operations took place.
Larking Gowen Partner, Steven Rudd, commented, “This decision is important for agriculture clients who are looking at investing substantial sums in storage facilities which are more bespoke than simple buildings, and who may now be able to do so with greater certainty.”
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