An arable farmer has recently won a capital allowances case at the First Tier Tribunal as to whether a grain dryer could qualify as plant. The Tribunal decided that the whole cost of building a steel framed barn specifically for drying and temporary storage of grain can qualify for plant and machinery allowances.
With the temporary increase in the annual investment allowance to £1m there is potential for other businesses to claim a full first year tax deduction on similar specialist buildings.
The facility was described as a steel framed store, constructed to allow for the control of temperature and moisture levels of grain. To a non-specialist observer, the facility was described to look like a large barn with a concrete floor in which piles of grain were lying.
The barn was able to store multiple types of grain. The middle of the facility was separated by a permanent concrete wall with one section being divided again by a moveable barrier. Within each section were ventilation tubes with fan assemblies designed to draw air up through the surrounding grain to allow it to dry and the moisture to be extracted from the barn.
The farmer argued that the barn came under the definition of a ‘silo provided for temporary storage’ and ‘plant and machinery’. As such they claimed full plant and machinery allowances on the cost of the build.
HMRC argued that the barn was in fact a grain store building and therefore excluded from allowances as expenditure on buildings or structures. HMRC was willing to accept that only 20 per cent of the cost would qualify for allowances, being those not related to structure itself. They also argued that the grain storage of several months was not temporary.
The tribunal concluded that the whole structure, not only the moveable items within, were integral to its function of drying, conditioning grain and keeping the grain conditioned in storage until it is to be been sold.
The tribunal also accepted that storage was temporary. They considered that the grain could not be kept for much longer than nine or 10 months without deteriorating. The Tribunal found in favour of the taxpayer on all counts and capital allowances were available for the entire cost.
Farmers that have recently constructed a grain dryer may need to revisit their tax returns to ensure they have maximised their claim. Capital allowances remains a very complex area, however with an annual investment allowance of £1m potentially available a successful claim could unlock cash to support future growth.