It is very likely that at some point your farmhouse and other buildings used in the farming business will require refurbishment, and it is important to be aware that whereas some repair expenditure can be relieved in the year it’s incurred (subject to a disallowed proportion for private use of buildings), alterations and improvements cannot. This is known as capital expenditure.
Repairs carried out which simply restate the building to its original condition are typically allowable as revenue expenditure. On the contrary the cost of replacing, improving or altering an asset is normally capital expenditure and can be relieved on disposal of the asset.
These rules extend to rental properties and in addition there are rules for rental properties purchased at below market value because they require extensive work in order to be habitable.
‘Capital versus revenue’ expenditure is a highly contentious issue and many cases have gone through the courts because HM Revenue & Customs and the taxpayer have disagreed over the tax treatment.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.