I have been approached by many clients regarding the Farm Business Improvement Scheme (FBIS) grants and asked if it is a good idea to build a new agricultural shed. The 40% grant looks attractive, with the remaining money put up by the farmer. ‘‘Sure that part is all tax deductible – isn’t it?’’ is usually the question out with the next breath.

Once we have sat down and slowed the conversation, a few issues arise.

Is building the new shed the correct business decision? Too often in the past, farmers (like all business people) have gone chasing new grants or subsidies but to the detriment of their business.

  • Is there a need for the new building?
  • How much will it cost? Are the estimates realistic or from the back of an envelope?
  • Is the activity the building is designed for profitable, eg finishing beef cattle.
  • Is there other use for the building – perhaps renting it out to another business if finishing cattle isn’t working?
  • What will the cashflow effect be like on the farmer?
  • The conclusion to these questions is often that my client needs to get a pen, paper and a calculator and pull together a good business plan. What are the aims and objectives, how it will they be achieved (bring in builders or self-build, planning, etc), cost and finally a cashflow projection?

    Then we move to the tax element of the conversation. In short, the permanent structure of the building has no capital allowances due on it (it is not tax deductable).

    However, the plant (non-permanent structure, eg feed bins, gates, gutters, slurry stores (including the digging out of the store)) has an annual investment allowance of 100% tax deductible up to £200,000. After £200,000, the capital allowance rate is 18%. This tax information needs to be factored into the cashflow projections (it can have a significant effect).

    The thought of such a large investment in a new shed can be very daunting. My final piece of advice is to ask for help – ask your accountant, farm adviser, friends and family with understanding of the industry or key skills.

  • Please note the advice given above is very general and cannot not be relied upon as each individual business case would need to be assessed. MCA Chartered Accountants cannot accept responsibility for decisions based upon this article.