The case was based on tax relief claimed on a new grain drying and storage facility by Mr Stephen May, a farmer in North Devon.

Mr May required a facility for drying and conditioning of the grain after it had been harvested, and for storing the grain until it was sold.

The facility was constructed on his land and he asked the supplier “to manufacture and supply a grain store building purposely designed for the customer to include control of temperature and moisture levels for grain”.

Although based in Devon this was a grain store facility very similar to many throughout Scotland. The findings of the case should encourage cereal farmers to review future and even previous expenditure on similar buildings.

Crucial to the decision was that the structure needed to be classed as a ‘grain store’ or ‘silo’ – Tax Legislation allows silos to be claimed as plant and machinery. HMRC challenged the claim arguing the facility was a “building”. HMRC were willing to accept that 20 per cent of the costs should qualify for allowances, the tax payer arguing that the entire expenditure should qualify.

The evidence demonstrated that expenditure on the structure cost was approximately double what a general purpose agricultural building would have cost, and was unsuitable for use as a livestock building. The tribunal was also happy to accept that the storage was temporary even although the grain could be in store for 9 months.

In reaching their findings the tribunal noted that “to an observer with no specialist knowledge of agriculture, it simply looked like a large steel-framed barn or shed with a concrete floor, in which piles of grain were lying on the floor, however, the facility was specifically built and designed to serve the purpose of drying the grain following harvest and maintaining it below certain temperature and moisture levels pending sale.”

The tax tribunal concluded that the whole structure, not just the moveable items within it, were integral to its function of drying, conditioning and the storage of grain.

Prior to the decision, most grain buildings and structures were deemed not eligible for capital allowances. Since the abolishment of the Agriculture Buildings Allowance in 2011 most agricultural buildings constructed have not been eligible for capital allowances. Under the new Structures and Buildings Allowance, it is possible to offset 2 per cent of expenditure on buildings each year for the next 50 years but qualifying for plant and machinery allowances is far more advantageous.

Andy Ritchie of Campbell Dallas warned that “the decision in this case does not allow any farm building to be treated as Plant & Machinery, it does however create opportunities for some structures and buildings to be treated as plant.” He advises “farmers should review recent expenditure on any buildings that are specialist in their purpose such as grain store and cold stores. The key to a successful claim is to seek professional advice to ensure they fully understand the Capital Allowances legislation, case law and understanding farm processes”.