Tax considerations for new farm buildings or extensions

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When planning to build new farm buildings or extensions, it’s crucial to consider the tax implications and the capital allowances available. Proper planning can maximise tax relief and reduce the overall cost of the investment. Here are some key considerations and the current capital allowances available for the 2024/25 tax year.

Qualifying expenditure

Understanding what qualifies for capital allowances is essential. Generally, capital allowances can be claimed on:

• Structures and buildings - new or renovated non-residential structures and buildings.
• Plant and machinery -  equipment and machinery used in farming operations.
• Integral features - elements such as electrical systems, water heating systems, and other long-life assets.

Structures and Buildings Allowance (SBA)

SBA allows businesses to claim 3% of the qualifying expenditure per year over 33 years. The building must be used for a qualifying activity, such as farming and the relief can be claimed when the building is brought into use.

Annual Investment Allowance (AIA)

AIA provides 100% tax relief on qualifying plant and machinery expenditure and integral features up to £1 million for the 2024/25 tax year. This is particularly beneficial for farmers investing in new equipment or machinery, allowing them to deduct the full cost in the year of purchase.

Specialist Buildings

Certain specialist buildings, such as slurry stores, may qualify for higher rates of plant and machinery allowances if they perform an active function essential to the farming process. 

Reduce your tax liability

Building new farm buildings or extensions involves significant investment, but understanding and utilising available capital allowances can provide substantial tax relief. By considering the qualifying expenditures, leveraging SBA, AIA, and plant and machinery allowances, and maintaining thorough records, farmers can effectively manage their tax obligations and reduce the overall cost of their investments.