Mr Stephen May, an arable farmer, produces grain for sale to local farms and feed mills. HMRC sought to restrict his claim for plant and machinery allowances (PMAs) on the construction of a silo facility for drying, conditioning and storing grain before sale.
What counts as plant and machinery can be contentious. PMAs can be available for capital expenditure on plant and machinery wholly or partly for the purposes of a ‘qualifying activity’, such as a trade. Statute, however, excludes certain types of expenditure on buildings, and there are then exceptions to this, such as ‘silos provided for temporary storage’.
Mr May maintained his facility was a silo falling within the exception: HMRC disagreed. The tribunal decided that Mr May’s ten-month grain storage could be admitted as ‘temporary’, where HMRC would have restricted this to a few days. It then reviewed whether the silo functioned as plant, concluding that it performed an active function within the overall trading activities. The verdict upheld Mr May, finding that the facility was a silo for temporary storage, and could be considered as plant.
Capital expenditure is key for businesses, and Autumn Budget 2018 made various changes to the capital allowances regime. The new non-residential structures and buildings allowance provides some relief for capital spending, though relief will be accelerated via a PMA claim. The Budget also increased the annual investment allowance for two years, providing full deduction for most types of plant and machinery up to an annual limit of £1 million for qualifying expenditure incurred from 1 January 2019.