Tribunal rules in favour of Capital Allowances for Grain Silo and Building Facility
6 February 2019
A recent decision by the First Tier Tax Tribunal will allow the construction of new specialist facilities used for the drying, conditioning and storage of grain to be treated fully as plant for tax purposes.
In the recent case of S MAY AND OTHERS v HMRC  UKFTT 32 (TC), the whole cost of a new grain facility was accepted as plant. This is important because, had the claim failed, the taxpayer would have only been allowed to claim around 20% as eligible for plant and machinery.
What was disputed?
Expenditure on buildings or structures as plant is specifically excluded in The Capital Allowances Act (“CAA”) 2001; however, this general provision is subject to certain exclusions. It is important to consider the precise facts and use in a business. The relevant exception in this case was “the provision of silos for temporary storage”.
It was viewed by HMRC that the facility was a grain store building, not a silo for temporary storage. This meant it did not fall within the meaning of a ‘silo’ for the exemption to apply. It was also viewed that the grain was stored permanently, rather than temporarily, as grain could be held for many months. Consequently, they disputed the facility’s active function in the business and took the view of it being treated as a barn or shed.
The Tribunal considered 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.
Is this a Building or Silo?
While the facility may look simply like a steel framed barn with a concrete floor containing quantities of grain, it was argued that it was actually a building designed and constructed for a very specific purpose with tailored features which kept the grain in a controlled environment for onward sale when needed and an inability to be used for other purposes such as livestock. To summarise, this facility played an essential function in the taxpayer’s trade leading to a better grain product and maximised financial return.
The Tribunal ruled in the favour of the taxpayer and agreed the facility was a ‘silo for temporary storage’ and ‘plant’ for the purposes of Capital Allowances rules.
A business that has, or is, constructing a specialist facility for a similar purpose should be mindful of the above ruling. There is always the chance that HMRC will appeal this decision but, for now, with the increase in Annual Investment Allowance to £1 million in each of the next two years, there is the potential to write a facility such as this off in full.