Example
Part 4: Agricultural buildings allowances
Overview
1221.This Part provides for agricultural buildings allowances. These may be writing-down allowances or balancing allowances. It also provides for balancing charges.
1222.Chapter 1 makes allowances available if qualifying expenditure has been incurred on the construction of a building for the purposes of husbandry. The person incurring the expenditure must have an interest in the related agricultural land. The first use of the building must be for husbandry.
1223.Chapter 2 defines the “relevant interest”. Allowances are given to the person holding the relevant interest.
1224.Chapter 3 defines “qualifying expenditure” for the purposes of agricultural buildings allowances.
1225.Chapter 4 provides entitlement to writing-down allowances. These are generally at 4% a year of the qualifying expenditure.
1226.Chapter 5 provides for balancing allowances and balancing charges if the relevant interest in the related agricultural land is transferred or the agricultural building is destroyed.
1227.Chapter 6 gives effect to allowances and charges.
Background
1228.The principal theme underlying the legislation is to give relief for capital expenditure incurred on the construction of buildings and structures for the purposes of husbandry. To do this the legislation needs to identify:
what expenditure qualifies for capital allowances;
who gets the allowances; and
how much relief is given.
History
1229.ITA 1945 introduced capital allowances for capital expenditure on the construction of agricultural and forestry buildings and works. Allowances were given at 10% a year for ten years to the owner or tenant of agricultural or forestry land. There were no balancing adjustments.
1230.Capital allowances generally were not, and still are not, available for expenditure on dwelling-houses. But allowances were given on expenditure on farmhouses (up to one third of the expenditure) and on cottages.
1231.FA 1978 introduced initial allowances at 20%.
1232.As part of a wider reform of business taxation, FA 1985 abolished initial allowances. It also reduced writing-down allowances to 4% a year.
1233.FA 1986 introduced a new system of agricultural buildings allowances. This included balancing adjustments. Balancing allowances gave an option of accelerated relief if a building or work was demolished or destroyed. It also introduced two special conditions. No allowances are given to a person who sells the agricultural land before the building has been brought into first use. And no allowances are given if the first use of the building is not for husbandry.
1234.FA 1988 abolished allowances for forestry buildings and works. This was part of a general reform which took the profits, gains and losses of forestry out of the tax system.
1235.The legislation was consolidated as Part V of CAA 1990.
1236.As a temporary measure FA 1993 introduced initial allowances of 20% for expenditure incurred under contracts from November 1992 to October 1993.
