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Capital allowances and temporary storage silos

Capital allowances and temporary storage silos

The FTT decides on the eligibility for capital allowances on the construction of a silo provided for temporary storage.

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The First-tier Tribunal (FTT) has released its decision in the case of Stephen May v HMRC. The case deals with capital allowances on the construction of a silo provided for temporary storage, specifically whether the facility was ‘plant’ for the purpose of CAA2001 s23 List C Item 28(a) and under its common law meaning. In summary, HMRC sought to argue that no capital allowances were available given the facility was a ‘building’ for the purposes of CAA2001 s21 and grain was not stored in a ‘silo’, nor was it stored there temporarily. The FTT allowed the taxpayer’s appeal, comprehensively establishing that the facility in question was ‘plant’ in its entirety and met all the required conditions of CAA2001 s23 to qualify for capital allowances in full.

The key technical matters that came out of the case include:

  • In accordance with recent capital allowances cases heard by the FTT, an everyday meaning of the term ‘silo’ was used to determine the application of CAA2001 s23 List C Item 28(a) and expert meanings were discounted, given CAA2001 provides no specific definition for this purpose. The FTT noted that the facility was designed, built and used as a silo and was unsuitable for use as a general purpose building (which HMRC had sought to argue);
  • Similarly, the FTT applied an everyday meaning for the term ‘temporary storage’. While the leading case law authority in relation to temporary silos (Schofield v R&H Hall Ltd) related to a storage duration of a few days, the FTT was clear that the storage duration in this case was temporary despite the raw material being stored for several months. The facility needed to be cleared on an annual basis due to crop cycles and so the raw material could never have been stored permanently and still sold for consumption; and
  • HMRC contended that the grain drying process would not work without the moveable plant and machinery located within the facility. The FTT sided with the Appellant that the grain drying process would also not work but for the specialist walls, floors and ceilings of the facility. The main structure of the facility was found to be essential for its functioning and therefore qualified as ‘plant’.

The specifics of the case are particular to the facility constructed by the Appellant but they do give us guidance on important technical and commercial aspects that have wider application.

  • The words in the statute need to be given their everyday meaning. The FTT adopted a simple, every day meaning approach to the words in the legislation; and
  • The FTT undertook a thorough review of the technical basis of the Appellant’s claim to reach its conclusion that the silo was correctly treated as plant. It did not accept HMRC’s view that the facility was just a building given that the facility in question satisfied each of the relevant requirements of CAA2001 in order to qualify for capital allowances. Given the evidence of the case, any HMRC challenge to such claims should be reviewed with care.

Taxpayers and advisers dealing with the tax treatment of such facilities should carefully consider the pertinent technical points raised from this case before claiming capital allowances in respect of temporary storage silos. Advice should be sought at an early juncture to ensure a robust technical assessment is obtained to check the validity of each case.

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