Capital allowances: March 2007 Archives
Agricultural buildings allowances (ABA) are available for capital expenditure incurred on the construction of agricultural buildings. These include barns, farm buildings, and cottages. A farmhouse also qualifies, but the allowance is restricted to only a third of the expenditure incurred.
For capital expenditure to qualify, it must be expenditure incurred on the construction of an agricultural building, for the purposes of husbandry on the land.
In addition, the 'relevant interest' should not have been sold, or if it has been sold, it has been sold only after the first use of the building. Generally speaking, the 'relevant interest' is the freehold or leasehold to which the person incurring the expenditure was entitled.
'Husbandry' includes any method of intensive rearing of livestock or fish on a commercial basis for the production of food for human consumption, and the cultivation of short rotation coppice.
Unlike industrial buildings allowance (IBA), there are no provisions for restricting allowances if the building is not in agricultural use at the end of an accounting period. However, if the first use of an agricultural building is for non-agricultural purposes, no allowances are to be given. Any allowances already given are clawed back.
Like IBA, relief is given at 4 per cent per year on a straight-line basis, with the result that no relief is given after the building has passed its 25th year.
Balancing adjustments
Budget 2007 provides for the phasing out of ABAs with effect from 2009-10. However, in order to ease the way to its abolition, 'balancing adjustments' are withdrawn in respect of any contracts entered into for the disposal of agricultural buildings on or after 21 March 2007.
For capital expenditure to qualify, it must be expenditure incurred on the construction of an agricultural building, for the purposes of husbandry on the land.
In addition, the 'relevant interest' should not have been sold, or if it has been sold, it has been sold only after the first use of the building. Generally speaking, the 'relevant interest' is the freehold or leasehold to which the person incurring the expenditure was entitled.
'Husbandry' includes any method of intensive rearing of livestock or fish on a commercial basis for the production of food for human consumption, and the cultivation of short rotation coppice.
Unlike industrial buildings allowance (IBA), there are no provisions for restricting allowances if the building is not in agricultural use at the end of an accounting period. However, if the first use of an agricultural building is for non-agricultural purposes, no allowances are to be given. Any allowances already given are clawed back.
Like IBA, relief is given at 4 per cent per year on a straight-line basis, with the result that no relief is given after the building has passed its 25th year.
Balancing adjustments
Budget 2007 provides for the phasing out of ABAs with effect from 2009-10. However, in order to ease the way to its abolition, 'balancing adjustments' are withdrawn in respect of any contracts entered into for the disposal of agricultural buildings on or after 21 March 2007.
Continue reading Budget 2007 - agricultural buildings allowance.
The Chancellor announced in the Budget on 21 March 2007 that both industrial and agricultural buildings allowances are to be phased out (pdf) in the coming years. They will be replaced by another reliefs package. In order to ensure smooth transition to the new system, 'balancing adjustments' will not be permitted in respect of contracts entered into on or after 21 March 2007.
For the rest of this article, I will focus on the operation of the industrial buildings allowance.
For the rest of this article, I will focus on the operation of the industrial buildings allowance.
Continue reading Budget 2007 - industrial buildings allowance.
