Plans, quotes and invoices for farm buildings should clearly detail the different elements of the project so that correct amounts can be claimed for capital and other tax allowances.
Since the loss of Agricultural Buildings Allowance in the 2008 Budget, it is often assumed that no tax allowances are available on buildings and so they are put up without checking what may be allowable. On a big project this could mean the loss of thousands of pounds, says accountant Nick Holmes of Chavereys, Faversham, Kent.
“There are circumstances where even a complete grain store has been fully allowed against tax, although this is unusual,” he says. “Contractors are not generally aware of what qualifies for the different rates of allowance but could help their customers a great deal by becoming familiar with them.”
Although there is no longer any ABA for new buildings, there is a special rate of 10% allowance on a reducing balance basis against the cost of integral features of a building and thermal insulation. A cold store, for example, would be highly likely to qualify in its entirety.
Integral features can include electrical systems (including general lighting), cold water systems, space or water heating systems, powered ventilation, air cooling or air purification, as well as floors and ceilings which form part of these systems.
Lifts, escalators and moving walkways, external solar shading and active facades (mechanically operated venting systems which allow heat to leave the building in summer but insulate in winter) are also classed as integral features.
Too often these claims are complicated by poor paperwork and tax relief is lost because the claims are made after the building has gone up, says Mr Holmes. “In some cases it’s a question of interpreting whether the building is simply where something takes place, or whether the building itself is integral to the activity.
“You need an informed professional from the outset to make sure that things are clear and you are not losing out. It may need a site visit but it could just cost an hour of someone’s time and could save a lot of money,” he says.
“It is also common for people not to realise that certain elements of construction may be classed as a repair, for example replacing a hardstanding in front of a farm building, and this would be 100% allowable as an expense.”
There is also a 100% allowance for certain energy saving or environmentally-friendly plant or machinery which should be considered when replacing existing (or investing in new) equipment.