Plant and machinery allowances may be given where a person carrying on a qualifying activity incurs qualifying expenditure.
By Simon Denye, Partner, Dow Schofield Watts Tax Consulting LLP
Qualifying activities are:
- A trade
- A property business (UK or overseas)
- A furnished holiday lettings business (UK or within the European Economic Area)
- A profession or vocation
- An employment or office
- Special leasing of plant and machinery
- Managing the investments of a company with investment business
- A concern in mines or transport undertakings
Qualifying expenditure must be “capital expenditure on the provision of plant or machinery”
The capital allowance legislation contains no positive definition of ‘plant or machinery’. They do state, however, that “expenditure on the provision of plant or machinery does not include expenditure on the provision of a building”. Similarly, most structures are restricted.
However, these restrictions are relaxed for various categories of expenditure, the most important ones being integral features and a whole host of items contained within list C (in the legislation)
This is why capital allowances can be considered for everything from electrical and cold water systems to trade specific sewerage systems, heavy machinery, movable partitions and lifts even if these form part of the building or are structures in their own right.
The point to note here is that this list does not mean these items qualify it merely says they aren’t excluded from qualifying. For the list C items, we then need to consider case law.
However, it is important to note that it is exceptional if an item in list C doesn’t qualify as list c was drawn up based on case law principles.
Simon is a Partner in Dow Schofield Watts Tax Consulting LLP. He has over 21 years’ experience providing advice to a wide range of clients including large corporates, SMEs and high net worth individuals.
