Building or Plant & Machinery – Casestudy

09 Nov 2022

Tax legislation is clear on the definitions of a building and what qualifies for plant and machinery and integral features, however this became something HM Revenue and Customs wished to challenge in a recent tax case, that the taxpayer successfully defended and won.

The farmer had incurred £300,000 on a potato store which from the outside looked like a commercial warehouse. The various structural elements within the store ensured the quality of the potatoes were maintained for a longer period than ordinarily expected, as the potatoes were sold to a crisp manufacturer. The farmer claimed capital allowances on the basis the storage was plant because it carried out a critical and special function – storing potatoes in the optimum condition until needed with specialist cold storage facilities.

In the case, HMRC wished to argue that the expenditure on the store for produce storage was that of a building, in which the store was the premises for the taxpayer’s trade, however, this was rejected.

It was successfully argued by the taxpayer that the store and all machinery within the store also functioned as part of the whole and were integral to ensuring the quality of the potatoes.

This case was the second in recent years, which has significant implications for arable farmers, with the first case involving the construction of a grain store, which was also deemed to be plant due to the nature of the vessel and use.

These recent tax cases highlight the importance of understanding the nature of the farming industry, farming businesses, capital expenditure and the tax legislation.

At WR Partners, we work to protect our clients, by advising our clients on such projects at an early stage, so as to assist with maximising tax relief available on such expenditure in an ever-changing climate of tax rate reviews and pressures on government finances.

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