Whether you have a legal, tax, insurance, management or land problem, The Farmers’ Weekly Business Clinic experts can help.
Andrew Robinson, partner and head of agriculture at Armstrong Watson, advises on the tax treatment of buying and relocating a livestock building.
Q. I read with interest the Business Clinic in September about what is and is not eligible for tax relief. I am considering buying a second hand property for £100,000. It will cost me £50,000 to remove it from its current location and another £50,000 to erect it on my property. The shed will be used to house livestock in a new manure pit, also costing £150,000. Does the fact that the building is second hand change the tax implications and do you have any other tax advice regarding what I am offering?
See also: Business Clinic: what tax relief can I get on my new dairy complex?
A. You raise a number of interesting questions about this project.
Firstly, with regard to the cost of the new slurry pit, this will be treated separately from the building located above and will give rise to 100% deductions for depreciation in the year of its purchase via the annual deduction for investment ( AIA).
Businesses will continue to be able to claim up to £1million in 100 per cent capital cost allowance each year on plant and machinery through the AIA.
It was one of the few mini-budget measures not to be reversed by new Chancellor Jeremy Hunt.
The position concerning the second-hand building is more complicated.
The first point to make is that HMRC generally do not accept the cost of putting up a roof over a slurry store or silage grab as eligible for write-offs.
It is on the basis that they can operate without a roof or cover. It’s frustrating when agricultural businesses are encouraged to improve water and air quality by doing work like this.
If you had constructed a new building above the manure pit, Structures and Buildings Allowance (SBA) would be available on the base structure at a rate of 3%, with higher relief rates being available on integral specs and factory, as explained in last month’s Business Clinic.
Obtain information from the supplier
The problem with buying a used building is that if it was built before October 29, 2018, it is not SBA eligible.
If it was built after that date, the amount of SBA you can claim is based on the original cost of the building, not the £100,000 you pay.
You must therefore obtain this information from the seller of the property before finalizing the purchase.
The cost of moving and constructing the building on your farm is treated separately from the initial cost.
HMRC allows the cost of “renovating or converting” a building as eligible for SBA, even if the building was built before October 29, 2018.
As this is relatively new legislation, HMRC gives little guidance on how the cost of moving a building is treated for SBA tax relief.
Careful thought should be given and expert advice sought before a claim for tax relief is made.
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