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Fruit orchards

Tax Planning for Farm and Land Diversification

Julie Butler (FCA)
Bloomsbury Professional
Publication Date:
Law Stated At:
11 July 2023

Diversification projects into orchards need to be monitored carefully.

Initial expenditure on the planting and staking of a new orchard is treated as capital expenditure, according to the principle that payment for a right to obtain trading stock does not qualify as a payment for that stock itself (see IRC v Pilcher (1949) 31 TC 314). It was held in this case, where a fruit grower purchased a freehold orchard at a price inclusive of the trees’ current fruit crop, that no part of the purchase price was deductible as revenue expenditure.

After trees have been planted in an orchard, subsequent expenditure on cultivation is deductible (Vallambrosa Rubber Co Ltd v Farmer (1910) 5 TC 529). Expenditure on the grubbing up (digging up) of an old orchard and subsequent planting of new trees (whether or not of the same kind) is normally allowable on a renewals basis principle, providing the replanting takes place within a reasonable time of the grubbing up (see BIM55275).