Tax considerations when constructing new farm buildings

LHP Accountants
Sep 23
3 min read

Generally, obtaining tax relief on the cost of constructing a new commercial building is restricted to the Structural Buildings Allowance (SBA) rate of 3% per annum.

This is less generous than the tax relief available on items classified as plant and machinery where relief is available at a rate of 100%.

There are, however, certain agricultural structures and buildings where the majority of expenditure is treated as plant and machinery for tax purposes, thus benefiting from 100% relief rather than 3%.

The two main structures where this would apply in the agriculture sector would be the construction of:

Milking Parlours and
Slurry storage systems
Here is where we would expect at least 90% of the expenditure to qualify for relief at a rate of 100%.

In order for effective tax planning, it is essential therefore that clients are aware of the tax relief their expenditure will attract.

When building a new shed, the costs of the general make-up of the building including the walls, concrete flooring, roof, steel frame etc will be restricted to capital allowances at a rate of 3% per annum.

It is also worth noting that the destruction and rebuild of a shed would fall into the definition of capital rather than revenue expenditure and therefore relief would once again be restricted to SBAs at a rate of 3%.

Expenditure incurred as part of the construction of a new shed that could attract up to 100% relief by utilising the Annual Investment Allowance (£1million for the 25/26 tax year) include:

Cattle mattresses
Monitoring systems
Water meters and monitoring equipment, including flow meters and water management software
Computer and telecommunications systems (including their wiring or other links).
Fire alarm, burglar alarm and surveillance systems (including their wiring or other links).
Feed systems (whether or not automated).
Slatted flooring areas (as internal parts of a slurry system).
Moveable, adjustable pen dividers.
Taps, sinks, basins and drinkers
Fitted bathrooms, toilets, showers, kitchens and furnishings in office and staff accommodation used in the business
All parts of a general electrical system (whether providing mains power or a lighting system)
All parts of air-conditioning systems including, for example, ventilation shafts, (automatically controlled natural ventilation) shutters, and metal mesh and curtain arrangements for controlling airflow.
Cold-water, hot-water and heating systems, including pipes, pumps, boilers, valves, etc.
Thermal insulation added to existing buildings or structures.

This list is not exhaustive, and it is always recommended that advice is sought prior to any significant investment to ensure that tax relief is maximised.

We would also suggest having management accounts prepared before the year end to enable investments into the business to be made in the most tax efficient manner.

If you have any further queries about tax considerations when in constructing farm buildings, then please don’t hesitate to contact us.

Carmarthen Branch - Llys Deri, Parc Pensarn, Carmarthen, SA31 2NF

01267 237534 | carmarthen@lhp.co.uk

Haverfordwest Branch - 1st Floor Agriculture House, Winch Lane, Haverfordwest, SA61 1R 01437 766749 | haverfordwest@lhp.co.uk

Lampeter Branch - Tŷ Harford, Sgwâr Harford, Llambed. SA48 7HD

01570 422204 | lampeter@lhp.co.uk

Tenby Branch -Barclays Bank Chambers, 18 High Street, Tenby, SA70 7HD

01834 844743 | tenby@lhp.co.uk

Aberaeron Branch - 1 North Road, Aberaeron, Ceredigion SA46 OJD

01545 570401 | Aberaeron@lhp.co.uk

Cross Hands Branch - Suite 3 & 6, Block B, Llys Y Barcud, Cross Hands, Llanelli, SA14 6RX 01269 834877 | crosshands@lhp.co.uk

Aberystwyth Branch - Aberystwyth Innovation & Enterprise Campus, Gogerddan, Aberystwyth, Ceredigion SY23 3EE