HMRC published guidance on capital allowances for pig farmers in February 2010.

This guide provides a summary the type of expenditure which will qualify for capital allowances for farming businesses.

At a glance

Capital allowances tax data: Main rates and allowances

Qualifying expenditure for active farming businesses

Expenditure on the cost of:

  • Plant and machinery
  • Its transportation to site
  • Its installation costs
  • Works made to alter land or property to allow installation.

For example:
Tom installs a new slurry drainage system in his yard. The cost of breaking up the existing yard, installing a new tank, laying new drainage and pipework, laying and levelling new concrete base to allow run off are all qualifying expenditure on plant and machinery.

Guidance for farmers on plant and machinery

1. Identify whether any expenditure qualifies for Enhanced Capital Allowances (ECA) (check the ECA website to obtain up-to-date details of eligible expenditure).

2. Identify expenditure which qualifies as Integral features.

3. Identify expenditure on Plant and machinery which will qualify for AIA or FYA.

What's New?

Following an announcement at Budget 2018, Finance Act 2019 includes legislation to:

  • End ECAs from 1 April 2020 for companies and 6 April 2020 for unincorporated businesses.
  • Reduce the special writing down allowance rate from 8% to 6% from 1 April 2019 for companies and 6 April 2019 for unincorporated businesses.
  • Temporarily increase the AIA to £1million for two years from 1 January 2019.

Overview and FAQs

Plant and machinery for farmers (incorporating HMRC's guidance on pig farmers):

  • Slurry storage systems, including, for example slurry storage tanks (whether above or below ground), any reception pit &/or effluent tank &/or channels and pipes used in connection with the slurry storage tank.
  • Small scale slurry and sludge dewatering equipment (*may qualify for 100 per cent ECA)
  • Rainwater harvesting and filtration equipment (*may qualify for 100 per cent ECA)
  • Gutters and associated piping for carrying rain water harvested for business uses
  • Sewerage systems designed to meet the particular requirements of the business
  • Silos for temporary storage
  • Concrete pad surrounded by low-level barriers for temporary storage of manure.
  • Storage tanks
  • Milking parlour, drainage, equipment and cleaning systems.
  • Moveable pens, crates, pig tents or pig arks
  • Monitoring systems (including telemetry) for monitoring temperature, humidity, lighting, water and food levels
  • Water meters and monitoring equipment, including flow meters and water management software (*may qualify for 100 per cent ECA)
  • Computer & telecommunications systems (including their wiring or other links)
  • Fire alarm, burglar alarm & surveillance systems (including their wiring or other links)
  • Feed systems (whether or not automated)
  • Slatted flooring areas (as internal parts of a slurry system)
  • Moveable, adjustable pen dividers
  • Taps, sinks, basins and drinkers (certain water efficient taps *may qualify for 100 per cent ECA)
  • Any agricultural or other machinery used for the purposes of the business.

    Pig farming example:

    Specialist equipment would include that required for the production, storage, handling & distribution of pig feed, pig transportation crates, pig weighing and handling equipment.

General plant and machinery

  • Lorries, vans, tractors, trailers, fork-lift trucks and other agricultural vehicles & machines
  • Computers & computerised equipment
  • Free-standing heaters & air conditioning units (certain radiant heaters *may qualify for ECAs)
  • Office equipment & furnishings.
  • Fitted bathrooms, toilets, showers, kitchens & furnishings in office and staff accommodation used in the business (certain water efficient taps, toilets and showers *may qualify for 100 per cent ECA). See notes below.

Farming integral features (8% WDA)

All parts of a general electrical system (whether providing mains power or a lighting system) irrespective of whether or not the system is designed to be 'trade specific'

Certain lighting controls and Automatic Monitoring & Targeting (AMT) equipment designed to save energy, *may qualify for 100 per cent ECAs, if certified by the Department for Energy and Climate Change (DECC)

All parts of air conditioning systems including, for example:

  • Ventilation shafts
  • ACNV (automatically controlled natural ventilation) shutters
  • Metal mesh & curtain arrangements for controlling airflow

Cold water, hot water and heating systems, including pipes, pumps, boilers, valves, etc. (but not sinks or basins that are plumbed into the system that can qualify for WDAs at 20 per cent – see above)

Thermal insulation added to existing buildings or structures. (Certain pipe work insulation *may qualify for 100 per cent ECA.)


A note from HMRC on claiming expenditure on items used in a mixed use dwelling house.   

"The guidance in relation to pig farmers assumes they are carrying on a trade. The prohibition in section 35 CAA 2001 (Editorial note: you cannot claim capital allowances in relation to a dwelling house that is used for property letting) is not usually in point.  

A farmhouse or a cottage may indeed be a dwelling-house, plant or machinery in those buildings is not prohibited from qualifying for allowances simply because they are dwellings. 

So if the farmer incurred capital expenditure installing toilets showers etc in a bath or shower room for use solely by employees or incurred expenditure on plant and machinery, such as kitchen fittings furnishing and cookers etc to create a dedicated staff kitchen, then regardless of whether the bath/shower room was in the farm house or a separate cottage or indeed in a ‘commercial building’ the expenditure would qualify.  

In these situations we are assuming that the expenditure was wholly for business purposes and there is no element of non-business use. Where there is mixed use (business and non-business) then all the facts would have to be considered to determine what amount (if any) would qualify."

Editorial notes
HMRC's guidance here is specifically addressed at pig farmers, but the same principles apply to any business use where the nature of the job is such that an employee needs to use an employer's facilities.
Where capital expenditure is incurred on equipment that is provided for staff accommodation and staff are paying rent, it is suggested that you agree an apportionment of any capital expenditure with your tax office.

Updates

1 November 2018: Budget 2018 announcements

3 March 2016: minor amendments made, links added and updated, split into tabs.