Budget 2007 - Farming and Estate Summary

Capital Allowances (CAs)

Agricultural Buildings Allowances (ABAs)/Industrial Buildings Allowances (IBAs)

As part of the major reform of the CA system, ABAs are to be phased out over the next four tax years.

For balancing events occurring on or after 21 March 2007, balancing adjustments and the recalculation of writing down allowances will effectively be withdrawn in order to prepare the way for the final abolition. There are exceptions for written contracts made before 21 March 2007 and for qualifying enterprise zone expenditure.

These measures will also apply to IBAs.

Plant and Machinery

More give and take from the Chancellor shows the extension of first year allowances of 50% for small enterprises for another year but from 2008/09 reduces the general writing down allowance from 25% to 20%.

2008/09 will also bring further reform to the CA regime with an annual investment allowance for the first £50,000 of expenditure, an increase from 6% to 10% for long-life assets and more worryingly a reduction in the rate from 25% to 10% on certain fixtures integral to a building. How these changes will fit together has yet to be announced, but it does appear that together with the loss of ABAs, a farmer investing in, say, poultry houses could be considerably worse off in years to come.