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Agricultural Building Allowance

The measures that I have set out reflect those requirements and obligations. The ABA forms only one element of the business tax treatment of agriculture. We must consider the rate of corporation tax and other capital allowances. A consideration of the overall business tax picture led the Government to announce a big package of reforms to business tax in Budget 2007. The ABA was only one plank of that. We set out the principles behind that package, the main features of which were a reduction in the main rate of corporation tax from 30 to 28 per cent., thus establishing the lowest corporation tax rate in the G7; enhancements to research and development tax credits; and a set of reforms to modernise and simplify the capital allowances system, including the abolition of ABAs and IBAs. That strong package of reforms is pro-growth and pro-investment. It has been estimated that it will add 0.2 percentage points per annum to investment above the trend rate and so strengthen the UK's global competitiveness. We recognised in Budget 2007 that businesses would need time to plan for the changes to business tax. Therefore, IBAs and ABAs are being phased out not overnight, but over a four-year period. For each year from 2008, a business's entitlement to the allowances will be progressively reduced by one quarter. The allowances will ultimately be withdrawn in April 2011.