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HMRC internal manual

Property Income Manual

Capital allowances: agricultural buildings allowance (ABA) for lessors


There is full guidance about ABA in CA40000 onwards - refer to that if you require more detail. The Property Income Manual concentrates on the aspects of ABA that affect property income.

Who gets ABA?

ABA is available to a person having a freehold or leasehold interest in agricultural land who incurs qualifying expenditure. So for rental business purposes, the lessor of farm property may be entitled to ABA - it depends whether the lessor or the tenant incurred the expenditure.

The ‘relevant interest’ in a building is the freehold or leasehold interest in the agricultural land held by the person who constructed the building when he constructed it. If the ‘relevant interest’ is transferred from the person who incurred the expenditure to someone else then the new owner of that interest receives the ABA.

What matters is the purpose of the original expenditure - the building in question may be no longer used for agricultural purposes, but ABA is still due. On the other hand, no ABA is due in respect of a building where the first use was not agricultural, even if it is used for agricultural purposes later.

What expenditure qualifies?

The expenditure that qualifies for ABA is capital expenditure on the construction of:

  • farmhouses,
  • farm buildings,
  • cottages,
  • fences,
  • other works.

The expenditure has to be incurred ‘for the purposes of husbandry’. ABA is also available for horticulture and market gardening. In the case of farmhouses no more than one third of the expenditure can be taken into account for ABA.

Method of giving allowances

Allowances are deducted in computing the profit of the rental business, and balancing charges are added, as for plant and machinery capital allowances, see PIM3050.