Finance Act 1990 Schedule 11: Capital Allowances for Agricultural Buildings and Works

Schedule 11 of the Finance Act 1990 in the United Kingdom significantly amended the capital allowances regime for agricultural buildings and works. It primarily focused on introducing a new system of allowances to encourage investment in agricultural infrastructure.

Prior to the 1990 Act, the existing system of capital allowances for agricultural buildings was considered inadequate and cumbersome. It often failed to provide sufficient incentive for farmers and landowners to invest in necessary improvements and new construction. Schedule 11 aimed to rectify this by establishing a more streamlined and beneficial allowance structure.

The core of Schedule 11 introduced a system where capital expenditure incurred on agricultural buildings and works could be written off over a period of 25 years at a rate of 4% per annum on a straight-line basis. This meant that for qualifying expenditure, a farmer could deduct 4% of the cost each year for 25 years from their taxable profits. This consistent and predictable allowance was designed to improve financial planning for agricultural businesses.

What constituted ‘agricultural buildings and works’ was carefully defined to include structures such as barns, silos, farmhouses (to the extent that they were used for agricultural purposes), fences, drainage systems, and other infrastructure directly related to agricultural activities. The definition was crucial in determining which expenditures qualified for the allowances.

However, certain restrictions applied. The allowances were not available for expenditure on land itself, or on buildings used primarily for residential purposes unrelated to agriculture. Additionally, there were rules to prevent abuse of the system, such as restrictions on claiming allowances for expenditure that was already subsidized by grants or other forms of assistance.

Schedule 11 also contained provisions dealing with the sale or transfer of agricultural property. Where property on which capital allowances had been claimed was sold, the proceeds were subject to balancing adjustments. This meant that if the sale price was higher than the tax written down value of the asset, the farmer would be liable to a balancing charge, which would be taxable income. Conversely, if the sale price was lower, a balancing allowance could be claimed.

The introduction of Schedule 11 was generally welcomed by the agricultural community as it provided a more attractive incentive for investment in agricultural infrastructure. By allowing capital expenditure to be written off over a defined period, it reduced the initial financial burden of such investments and improved the profitability of farming businesses. The clarity and simplicity of the new system also made it easier for farmers to understand and comply with the tax regulations.

Over time, the legislation relating to capital allowances has been amended and updated by subsequent Finance Acts. Nevertheless, Schedule 11 of the Finance Act 1990 remains a significant piece of legislation in the history of agricultural taxation in the UK, establishing a framework for incentivizing investment in agricultural buildings and works.

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