The substantial increase in the Annual Investment Allowance has provided businesses with a huge incentive to invest in plant and machinery and receive immediate tax relief on the investment into qualifying expenditure.

If you’re thinking about investing, you will need to take time to carefully plan to ensure you are investing in the most tax efficient way. This planning requires not only attentive timing but also a consideration as to what assets the business requires; ensuring the assets chosen qualify as expected.

An area that causes confusion, where capital allowances are concerned, is grain storage. In May 2019, the First-Tier Tribunal (FTT) decided that a horizontal grain silo qualified for plant and machinery allowances. Whilst decisions of the FTT do not generally create a binding legal precedent, the areas examined in this case are useful in determining what extent other grain storage facilities qualify for plant and machinery allowances.

Most grain drying facilities, at first glance, appear to fall onto excluded lists whereby HMRC explicitly note the expenditure does not qualify as plant and machinery. Capital Allowances Act 2001 ‘Section 21 – List A’ covers assets treated as buildings (floors, ceilings, stairs, etc.) and ‘Section 22 – List B’ covers excluded structures (a fixed structure of any kind, other than a building).

HMRC also provide a list of expenditure unaffected by sections 21 and 22. ‘Section 23 – List C’ covers various expenditure but most notably, the ones of interest to many of our clients are:

  • Partition walls – where movable and intended to be moved in the course of the qualifying activity
  • The provision of silos provided for temporary storage
  • The provision of slurry pits or silage clamps

In all of these situations, the asset meets another test. It performs a function. HMRC accept that a grain silo is more than a structure. HMRC’s manual CA22050 states ‘treat a grain silo as plant where, together with its attendant machinery, it performs a function in distributing the grain so that it acts as a transit silo rather than a warehouse’.

The word ‘silo’ is not defined in HMRC legislation and so it is highly likely that HMRC will continue to challenge where the total cost of constructing a grain store is claimed as plant. Items such as driers, fans and pedestals are undeniably plant whilst other elements such as grain panels can fit within the ‘partition wall’ definition and be deemed plant. Only where the very structure of the building is integral to the success of the operations carried out, are HMRC likely to agree the building is plant.

Income Tax relief through capital allowances is one way that grain stores can be tax-efficient but all is not lost if the definition of plant is not met for capital allowance purposes. Grain stores also present a good Rollover Relief opportunity to minimise exposure to Capital Gains Tax where qualifying assets have been disposed. Using a pension fund to construct a grain store can also be extremely tax efficient.

If you are considering investing in grain storage, our farming and agriculture team will be happy to discuss the possible taxation benefits available to you and your business. Contact Kerry O’Reilley on or 01295 250401 for more information about the tax relief available on grain storage.