Updated: Jul 5, 2020
Farmers and other businesses that need to store grain or other crops as part of their wider business needs will welcome a recent decision by First Tier Tax Tribunal to allow the construction of a new specialist facility used for the drying, conditioning and storage of grain to be treated as plant in full.
In the recent case of (1) STEPHEN MAY (2) STEPHEN MAY AND G MAY T/A S.C. MAY and THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS  UKFTT 0032 (TC), the whole cost of a new grain facility was accepted as plant in its entirety. Had the claim failed, the taxpayer would have only been allowed to claim around 20% as eligible for plant and machinery allowances.
The Capital Allowances Act (“CAA”) 2001 specifically excludes expenditure on buildings or structures as plant; however, this general provision is subject to certain exclusions. These exclusions don’t work by analogy, so it is important to consider the precise facts and use in the taxpayer’s business. The relevant exception in this case was “the provision of silos for temporary storage”.
HMRC took the view that the facility was a grain store building, not a silo for temporary storage and was not capable of falling within the meaning of a ‘silo’ for the exemption to apply. They also took the view the grain was not stored temporarily (storage for many months was not uncommon). They disputed its active function in the business and regarded it as a storage facility in much the same way as a barn.
Tribunal was called upon to decide two points (1) whether this facility is a “silo provided for temporary storage” within the meaning of List C in s23 of the CAA 2001; and (2) whether this facility is “plant or machinery” within the meaning of s11(4)(a) CAA 2001.
Building or Silo
Tribunal visited the site and observed that to someone with no specialist knowledge of agriculture, the facility simply looked like a large steel framed barn or shed with a concrete floor, in which piles of grain were lying on the floor.
However, on closer inspection, it became clearer that it was a building designed and constructed for a very specific purpose with tailored features to economically keep the grain in a controlled environment for onward sale when needed. It had no other obvious purpose (i.e. it was not suitable for livestock) and played an essential function in the taxpayer’s trade that resulted in a better grain product and ultimate financial return.
At the time of the visit, three types of grain were being stored in the facility, wheat, barley and oats. The wheat and barley were separated by a permanent concrete wall running down the middle of the interior of the structure, and the barley was separated from the oats by a movable barrier.
A “Silo” is not defined in statute and Tribunal held the view that it must take its ordinary Oxford English Dictionary meaning which included “a pit or underground chamber used for storing grain, roots, etc,; one in which green crops are compressed and preserved for fodder as silage. Also, a cylindrical tower or other structure built above ground for the same purpose.“
Tribunal allowed the appeal on both points (i.e. that the facility was ‘a silo for temporary storage” and ‘plant” for the purposes of the capital allowances rules).
It is well known that HMRC do not like plant and machinery allowances claims for buildings or structures and it remains to be seen whether they will appeal this decision.
A business that has constructed a specialist facility for a similar purpose, or is considering the same, would do well to consider the above ruling. With the increase in Annual Investment Allowance to £1 million in each of the next two years, such expenditure has the potential to be written off in full.
If you have any questions, please do contact us.