Director Gateley Capitus
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How could HMRC stoop silo?

1st Feb 2019
Director Gateley Capitus
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Grain silo

The capital allowances claimed for a grain store demonstrate how sometimes whole buildings can qualify as plant.

Stephen May (TC06928) is an arable farmer, growing mostly cereal crops. He built a facility to dry and store his grain and claimed plant and machinery allowances (PMAs) for the whole cost. HMRC accepted the ventilation equipment in this grain silo qualified for PMAs, but that amounted to only about one-fifth of the total cost. 

What was built

The facility was a steel framed barn with a concrete floor and three metre high walls. Piles of grain lay on the floor, separated by a permanent wall down the middle and a moveable barrier.

The ventilation equipment to dry the grain included an air inlet vent on one side of the building with an extract fan opposite to draw air across and out of the space. Sitting on the floor, protruding through the levelled piles of grain, were moveable vertical tubes (pedestals) with fans on top. When the outside air was dryer than the grain, a central control switched on the pedestal blowers, and the drawn-up air removed moisture from the grain.

Grain was held for up to nine or 10 months in this silo, then the facility was emptied and cleaned ready to receive the next harvest.

What did HMRC say?

HMRC’s capital allowances manual states: “Treat a grain silo as plant where, together with its attendant machinery, it performs a function in distributing the grain so that acts as a transit silo rather than a warehouse” (CA22050). But as practitioners will know, the HMRC manuals do not have the force of law, nor do they always accurately reflect it.

One incredible aspect of this case was that evidence was given in support of the taxpayer’s argument by Mr Doodney, who had worked for HMRC as a capital allowances specialist until 2015. While within HMRC he was asked to provide technical guidance on this claim for the silo costs, and he advised that the farmer’s case had merit. But he was told that HMRC’s policy was to “hold the line” that such structures were not eligible. So, he had produced a report stating that it did not qualify!

What does the law say?

Statute says that expenditure on a “building” (CAA 2001 s21) or a “structure” (CAA 2001 s22) cannot qualify for PMAs. However, either may qualify for capital allowances under case law principles as “plant” if the asset is (amongst other things) a “silo” provided for “temporary storage” (CAA 2001 s23, List C, item 28).

Both the taxpayer and HMRC agreed that this facility was a “building”, but they differed over whether it was a silo provided for temporary storage, and whether it was “plant”.

Was it a silo?

A “silo” is not defined in the legislation, so the parties agreed it took the dictionary meaning.  They settled on a definition that a silo needed to have no purpose other than storage, and it could include any structure built above ground (not just pits, underground chambers or above ground cylindrical towers).  

The tribunal found that this building was specifically designed, built, and used to store, condition, and maintain grain through a continuing process of aeration. The cost was much more than a general-purpose agricultural building, and its features made it unsuitable for other agricultural uses.  The tribunal was satisfied that it was a silo. 

Was the storage temporary?

There is no relevant statutory definition on the question of “temporary storage”. HMRC relied upon the only other reported capital allowances case about a silo (Schofield v R&H Hall Ltd (1974) 49 TC 538). There the grain was stored for up to seven days in transit (hence HMRC’s manual guidance). HMRC argued that this exceptionally short period was “temporary” whereas May’s nine or 10 months was “permanent”.  

Unsurprisingly, the tribunal was unconvinced by this. It noted that silos could be used to store all sorts of commodities, some of which may be kept indefinitely (in effect, permanently). However, here the grain could not be kept for much longer than 9 or 10 months without deteriorating and was only held until it could be sold. As the farmer’s business was growing and selling grain (not storing it), holding his stock was just part of that.  Consequently, the tribunal was happy that the storage was “temporary”.

Was the building “plant”?

Finally, the tribunal had to decide whether the silo qualified for capital allowances as “plant” under common law - the “in which” or “with which” test. Did the silo function as apparatus with which the farmer carried on his trade? Or was the silo non-qualifying business “premises” in which the trade operated?  

The tribunal concluded that the facility dried and conditioned grain, and all its components, including the structure, were integral to this and constituted business apparatus. So, the cost was eligible for capital allowances in full even though it was a “building”.


Given that HMRC’s policy is to resist claims like this, but this decision went wholly the taxpayer’s way, it will be interesting to see whether HMRC appeals this case.

Replies (10)

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By Brend201
03rd Feb 2019 16:01

"Ethics" is a word used frequently in commercial and other activities. I would be interested in some of the ethical assessments in this case:
1. HMRC overruled an internal opinion that the structure was eligible for allowances and required the individual to re-write his opinion to state the contrary; and
2. The HMRC opinion giver left HMRC and within a year was revealing all the details of his previous work to the taxpayer. (Who made contact first? Who found who?)

Thanks (6)
Replying to Brend201:
By dgilmour51
04th Feb 2019 11:48

Thank you for managing to get a giggle out of me on a monday morning ...
Ethics and HMRC - hohoho - how I laughed.

Thanks (1)
Replying to Brend201:
By AndrewTall
04th Feb 2019 12:12

1. para 37 of the judgement says that while working in HMRC the expert "expressed the view that there was merit to the Appellant's claim". 'Merit' doesn't necessarily mean that the expert thought that the claim qualified, merely that the claim was worth considering.

2. the judgement doesn't say anything about what the expert told the taxpayer, merely the evidence that the expert provided to the court and that "in 2016, while working as a tax consultant, he was asked to assist with the present case"

So it isn't clear that the expert either gave a definite' the claim qualifies' opinion to HMRC and then wrote a report to the contrary to 'hold the line', or that the expert told the taxpayer confidential information gained during their time working for HMRC, or that the expert looked up the taxpayer after leaving HMRC. I agree that those aspects of the case raise ethical concerns but I wouldn't quite agree with how you phrased the points.

I note that while HMRC has incorporated PCRT into its standards for tax agents and PCRT is mandated by various membership bodies, as far as I am aware HMRC does not mandate PCRT for its own staff so the ethical standards for HMRC staff would follow a civil service code of some description unless they were also a member of a membership body which has mandated adherence to PCRT. So the ethical standards within HMRC aren't necessarily those we would expect for those outside HMRC - though I doubt the public would expect HMRC's standards to be significantly lower.

That said I think that if advising someone on the ethical position my advice would be 'don't start from here' and 'don't just behave ethically, seek to be seen as behaving ethically'.

Thanks (3)
Replying to Brend201:
By mdoodney
05th Feb 2019 11:47

Hi there.

That was me, and I'm happy to clarify.

My witness statement only covered the apparent conflict of interest point. I was made redundant when HMRC restructured in 2015 and one firm I provide enquiry support to passed this to me for review in 2016, around 2 years after I had been last involved in it. When in HMRC I had been a consultant on the CA point only, never the case owner. I never personally approached the client or agent and I wanted to make it clear to the FTT that I hadn't just hopped over the back fence with the HMRC silver (which has been known to happen on occasion).

When in HMRC I never personally concluded that this did qualify for allowances, merely that it was more nuanced than I first expected and that I felt it warranted further consideration. The final HMRC 'view of the matter' was issued by another officer some time after I left HMRC and the final decision as to the facts was made by the FTT.

Thanks (7)
Replying to mdoodney:
By AndrewTall
05th Feb 2019 11:54

Good to hear Mr Doodney

Thanks (1)
Replying to mdoodney:
By Brend201
05th Feb 2019 14:56

It is amazing that we now have the authoritative answer from the horse's mouth.

Two fine responses from AndrewTall and mdoodney. Thanks and best wishes to both.

Thanks (2)
Replying to mdoodney:
Steven Bone
By Steven Bone
05th Feb 2019 17:03

That is helpful clarification from Mr Doodney (thank you), but difficult to reconcile aspects with how it was reported by the FTT (at para 37):

"Mr Doodney worked for HMRC as a capital allowances technical specialist until 2015. While working with HMRC he was asked to provide technical advice on the basis of the Appellant’s capital allowances claim. Internally within HMRC he expressed the view that there was merit to the Appellant’s claim, but he produced a report stating that the expenditure did not qualify because he was told that it was HMRC policy to “hold the line” that such structures did not qualify. In 2016, while working as a tax consultant, he was asked to assist with the present case."

Thanks (0)
By petestar1969
04th Feb 2019 10:43

Another example of how useless HMRC are.

Thanks (0)
By AndrewV12
04th Feb 2019 11:24

Mmmmmmmmmm why does everything end up so complicated, even though Silos have been around for 100's of years.

The only thing you could advise is, claim the lot, you may be in the right.

Thanks (1)
By johnjenkins
04th Feb 2019 13:23

The fact that HMRC disregarded the Inspectors' findings lead me to believe that this wasn't a case of correctness, more of tax collection enhancement.

Thanks (2)