10: Capital allowances - Definitions

Question 1

Capital allowances are (loosely) HMRC’s version for ______?

Answer 1

Depreciation

It is a form of ‘tax approved depreciation’

Question 2

Plant and Machinery:

HMRC practice is to treat an asset that has an expected life of _ years or more to be for ‘permanent employment’ and therefore qualify as a plant

Answer 2

2 years

Question 3

Plant and Machinery:

if an asset has an expected life of _ year or less, it will be treated as revenue expenditure

Answer 3

1

Question 4

are business premises classed as plant?

Answer 4

no

Question 5

P&M:

By using the functionality test, if an asset has a function, is it classed as a plant?

Answer 5

yes, therefore CA can be claimed

Question 6

If gates are added to a property, are these classed as plant and can CA be claimed?

Answer 6

they are classed as ‘part of the property’ which is not a plant, therefore CA cannot be claimed

Question 7

are systems for water, electricity and gas for the building premises classed as plant?

Answer 7

no, therefore cannot claim CA on these

Question 8

is sewerage and drainage systems for the business premises classed as part of the building or plant?

Answer 8

part of the building, therefore cannot claim CA

Question 9

name three types of structures and land that do not qualify as plant

Answer 9

1. Tunnel, bridge, viaduct etc.
2. Pavement, road, car park.
3. Canal or basin.
4. Dam, reservoirs etc.
5. Docks, harbours, wharfs.
6. Dikes and sea walls.

Question 10

Does ‘alteration of land’ qualify as plant?

Answer 10

no

Question 11

Does a partition wall (that is moveable) qualify as plant?

Answer 11

YES.

A List C item. This is part of ‘List C’ and is an exception to the walls in ‘List A’ - partition walls where moveable were apparatus with which the company carried on its business

Question 12

If a trader had a restaurant and put decorative items around the walls and restaurant, are these classed as plant?

Answer 12

Yes.

A List C item. It is agreed it creates an ‘atmosphere or ambience’ and this was an important function of the company’s trade.

Question 13

Swimming pools including slides and diving boards - are these items classed as plant?

Answer 13

Yes.

A List C item. No longer classed as part of the setting and now part of the part of the means whereby the trade is carried on

Question 14

If a business wants to implement a special type of machinery which is significantly large and will need prior construction of the current building to install this, will the cost of the prior construction qualify for P&M?

Answer 14

Yes

For example if a new floor has to be laid or strengthened, the costs of the new floor will qualify as P&M and therefore be eligible for CA

Question 15

Does thermal insulation of buildings qualify for CA?

Answer 15

Yes

Question 16

where an item is classed as an integral feature to the building, will these qualify for CA?

Answer 16

Yes

Question 17

Integral features for CA purposes are…

Hint: LASHEE

Answer 17

L ifts, escalators and moving walkways
A ir conditioning / A ir cooling
S pace heating systems
H ot and cold water systems (excl toilet + kitchen)
E lectric lighting and power systems
E xternal solar shading

Question 18

what is the difference in treatment between a suspended ceiling above the stairs vs suspended ceiling above the restaurant seating area?

Answer 18

above stairs = not plant as it does not fulfill a function

above restaurant seating area = plant as it fulfills a function to make the restaurant create an atmosphere

Question 19

do shutters qualify as plant?

Answer 19

no