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HMRC internal manual

Capital Allowances Manual

From
HM Revenue & Customs
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ABA: outline

Agricultural buildings allowance (ABA) gives relief for the capital cost of constructing an agricultural building or other works. ABA was introduced in 1945. The system of ABA introduced in 1945 lasted until 1986 when it was replaced by the current system. The ABA system introduced in 1986 applies to construction expenditure incurred on or after 1 April 1986 or, where there was a contract entered into before 14 March 1984, construction expenditure incurred on or after 1 April 1987. This guidance is about that system.

Agricultural buildings allowance was phased out by FA2008.

A person gets

  • 75% of the allowance for the financial year beginning 1 April 2008 / tax year 2008/09
  • 50% of the allowance for the financial year beginning 1 April 2009 / tax year 2009/10
  • 25% of the allowance for the financial year beginning 1 April 2010 / tax year 2010/11

There is no ABA for the financial year beginning 1 April 2011 / tax year 2011/12 onwards.

The ABA system is very like the IBA system but not identical to it. For example, no ABA is due on the land on which a building stands, the expenditure which qualifies for allowances is called qualifying expenditure and the qualifying expenditure is written off at an annual rate of 4% on a straight-line basis CA41100. ABA on a building is given to the person who holds the relevant interest in relation to the construction expenditure on it CA41000 just as IBA on a building is given to the person who has the relevant interest in relation to the construction expenditure on it.

These are the main differences between ABA and IBA:

  • ABA begins as soon as the construction expenditure is incurred whether or not construction is complete and whether or not or the building has been brought into use.
  • The only ‘use’ condition for ABA is that the first use of the building must be for the purposes of husbandry. Once that condition has been satisfied allowances continue until all of the qualifying expenditure has been written off even if the use of the building changes.
  • The relevant interest in relation to an agricultural building is not an interest in the building as is the relevant interest in an industrial building. The relevant interest in relation to an agricultural building is an interest in agricultural land, which is called the related agricultural land CA40200.
  • When the relevant interest in relation to an agricultural building is transferred ABA after the transfer normally continues as before and go to the person to whom the interest is transferred CA41200. There is not a balancing adjustment unless an election is made CA41200.
  • The relevant interest in relation to an agricultural building is limited to specific types of interest as recognised in UK property law. There is no such limitation on the relevant interest for IBA.

These are the other ways in which ABA differs from IBA:

  • ABA is given on other works as well as buildings CA40100 and so the scope of ABA is wider than the scope of IBA.
  • Dwellings, such as farmhouses and cottages, usually qualify for ABA CA40100.
  • Some retail shops qualify for ABA CA40100.
  • ABA is made for a fixed period - the writing down period CA41100; and
  • Buildings overseas never qualify for ABA CA40100.