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Taxation: Agriculture

Volume 459: debated on Thursday 3 May 2007

To ask the Chancellor of the Exchequer for what reasons he plans to withdraw writing down allowances on industrial and agricultural buildings between 2008-09 and 2010-11; what assessment he has made of the likely impact of this change on the farming industry; how many farm businesses he estimates will be affected; and to what value. (135573)

The Government’s decision to withdraw the industrial and agricultural buildings allowances were based on an assessment of a number of issues, common across industry sectors. The Government have not sought to target the farming industry or any other industry with this change.

Industrial buildings allowances (IBAs) and agricultural buildings allowances (ABAs) were introduced in 1945 to encourage post-war reconstruction. They are now a poorly focused subsidy, selectively available on a disparate range of assets, including some that typically appreciate in value. IBAs and ABAs have long been recognised as a significant distortion in commercial property investment. These issues are compounded by the compliance burden imposed by their complicated rules.

The withdrawal of IBAs and ABAs is not an isolated measure. The Budget also announced cuts in both the basic rate of income tax and the main rate of corporation tax and introduced a new annual investment allowance (AIA) of £50,000 for business investment from 2008. Taken as a whole, these reforms to the business and personal tax systems are designed to deliver increases in investment and growth overall.