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The Tax Track is the new podcast series from ICAEW where we explore the latest from the tax world, and what it means for tax professionals, accountants, taxpayers and businesses. In this episode, we take a look at the wider implications of an unusual capital allowance case regarding camping pods that went to tribunal.


  • Lindsey Wicks, Senior Technical Manager, Tax Policy, ICAEW
  • Stephen Relf, Technical Manager, Tax, ICAEW
  • Richard Jones, Senior Technical Manager, Tax Policy, ICAEW


Ed Adams


Lindsey Wicks: Hello and welcome to The Tax Track, the new podcast series from ICAEW, where we explore the latest from the tax world and what it means for our members and tax professionals alike. In this episode, we’ll be looking at the wider implications of an unusual capital allowance case that went to tribunal.

Stephen Relf: This is a good illustration of how you can use tax cases to try and predict how HMRC will react to a claim.

LW: We will also be discussing the change that’s being introduced to the cash basis this April.

Richard Jones: There were various suggestions mooted and, quite surprisingly, all of them were adopted.

LW: I’m Lindsey Wicks, Senior Technical Manager for Tax Policy at ICAEW. I’m joined this month by two colleagues with some stories to share: Stephen Relf, Technical Manager, Tax and Richard Jones, Senior Technical Manager, Tax Policy. Welcome to you both.

SR: Hi, Lindsey.

RJ: Hi there, Lindsey.

LW: Let’s get into our first topic for today, which is all about whether a camping pod is plant and machinery. Cases about the definition of plant and machinery seem to be as common as cases about the zero rating of food. Stephen, do you want to kick us off with a bit more background to this case?

Stephen Relf: Yes, certainly. So, this case concerns a company called Acorn Venture Limited. And that company provides residential adventure holidays for schoolchildren in the UK. One of its sites is in Wales, it purchased the site back in 2008 and at that point the accommodation was provided in a mixture of Portakabins and tents in a kind of tent village. If we roll forward a couple of years, by about 2015 the Portakabins had come to the end of their useful life, and there had been some concerns expressed about children’s safety in the tents. So the company made the decision to spend quite a lot of money – probably around £300,000 – on buying 26 new camping pods.

Those camping pods were fully assembled off-site. They were delivered to the site on the back of a lorry and then were lifted in place by a forklift. They stood on the hard-standing area where the Portakabins had been, resting by their own weight, but they were tethered to the ground just to prevent any movement in the wind. The company took the view that the expenditure they incurred on buying those camping pods was expenditure on plant and machinery and they claimed capital allowances. And they claimed capital allowances in the form of the annual investment allowance. As we all know, that gives 100% tax relief in the year in which the expenditure is incurred. So they submitted their corporation tax return for the year ended 30 September 2015 on that basis. There was an inquiry. HMRC disputed the claim for capital allowances. There followed quite a lengthy period of correspondence between HMRC and the company, I think going on for more than five years. And then ultimately, we ended up in front of the First-tier Tribunal.

LW: And what issues did the tribunal consider?

SR: It was common ground, first of all, that the expenditure was capital. So that’s good. Also HMRC didn’t challenge it under the premises test – it was accepted that these were items that were used in the company’s trade. But unfortunately that did leave a few more issues to resolve.

In the capital allowances legislation, there is a provision which denies cap allowances for plant and machinery where the expenditure is on a structure. And there is a fairly limited definition of structure in the Capital Allowances Act, but it basically says that the structure is not a building. And that leads us on to our second issue, because there is then another standalone provision which denies capital allowances for expenditure on plant and machinery where the expenditure is on a building. But to complicate matters further, if it is a building, there is a saving – there is an exception from that rule – which applies if the building is movable and if there is an intention to move it. So essentially, the First-tier Tribunal had to work out: were the pods structures? Were the pods buildings? If they were buildings, then were they movable? And if they were buildings, and if they were movable, there was an intention to move them.

Before we go any further though, one key point of information. The pods that were intended for the children had quite a basic fit-out. Essentially, it was just beds in the pod, nothing else, whereas the pods that were intended for the teachers had only two beds, which left an awful lot of space for additional facilities – for washroom facilities and some limited catering facilities as well. So, a significant difference between the two types of pod. And before the tribunal looked at the issues in detail, it was agreed that they could come to a different conclusion for the two different types of pod.

If we take each issue in isolation, we’ll begin with the structures issue: in the definition in the cap allowances legislation, it does refer to the structure having to be fixed. Now, the kids’ pods, although they were tethered to the ground to prevent wind damage, the tribunal ruled that they weren’t fixed and so they could not be structures. But for the teacher pods, with their washroom facilities, then obviously that involved plumbing and drainage, and that meant that they were fixed. Therefore, for that issue, the teacher pods were structures.

It then went on to consider the building point. In terms of the basic pods, we know they’re not fixed. The tribunal also said that they didn’t provide anywhere near enough accommodation to merit being classified as a building. Essentially, it ruled that they were pretty much similar to a tent – it was kind of a posh tent. But the teacher pods, again the washroom facilities and the catering facilities proved to be their undoing. They were fixed to the ground, and they did provide what you may consider to be quite a high standard of accommodation. So they were buildings.

LW: I don’t think they’d be high enough accommodation to encourage me to go camping.

SR: Certainly not, me neither. I don’t know what the kids felt about all this as well, should they happen to read the decision. So essentially, if we take stock at this point, the kids’ pods are fine, we can claim capital allowances on them, they’re not structures, they’re not buildings. The teachers’ pods are buildings. So now we need to consider, are they movable, and if so, was the intention to move them? Now, the movable question, you’d think, would be fairly straightforward given that they arrived on site fully assembled. But HMRC contested it. Yes, in theory, they’re movable, but for HMRC, for all practical purposes, you weren’t going to move these things. The FTT rejected that quite quickly, that the costs and bureaucracy was basically just part and part of a business decision – the principle was that they were movable. But the sticking point is whether or not the company actually intended to move them at the time it made the claim for capital allowances.

The issue really for the company here as well is that because it was a small company, with a relatively small management team, it didn’t necessarily document management decisions maybe as fully as it would have benefited from doing so. It relied quite a lot on the oral testimony of a key director and employee. So that meant that at the time they made the claim for the year ended 30 September 2015, they did not have the intention to move the pods, and therefore they could not qualify for capital allowances at that point. In summary, the company won its appeal and can claim cap allowances in respect of the children’s pods. But its claim for cap allowances was denied in respect of the teacher pots.

LW: So what can we take away from this case? One thing for me, I think, is the point about intention. That’s really hard for owner-managed businesses, isn’t it? And also, would they have even known enough about the rules to know that recording that intention was necessary? Because that’s really deep in the legislation, isn’t it?

SR: It is, yes. I think that’s probably the key takeaway here. If you’re looking to rely on something being movable or the intention to move it, this case is a perfect illustration of how you can establish that in terms of documentary evidence. So it’s a fantastic looking-forward grid for that.

RJ: Another interesting thing was the fact that intention could change over time, which is really interesting. I hadn’t really come across that technically before. So you could potentially have an addition some years later, because the intention was to move from it being a building to a movable building.

SR: And obviously, timing was a massive problem here, because they were relying on the annual investment allowance. You claim that for the year the expenditure is incurred. So yes, they can kind of put this right in the future by claim capital allowances at a later date, but they always lose the benefit… that time advantage of claiming 100% in year one.

LW: And this case predates the introduction of structures and buildings allowances, or SBAS, in 2018. Would camping pods qualify for SBAs these days?

SR: In the SBAs legislation, which came in, I think, around late 2018, there is a priority rule to the effect that if something qualifies for plant and machinery capital allowances, you can’t then claim SBAs. But the problem in a case like this is that if you’re not sure if something qualifies for plant and machinery allowances, where does that leave you with regard to a potential claim for SPAs, which is a really good point.

LW: And there’s lots of exclusions. The definitions are different. Even though we’ve looked at structures and buildings from a plant and machinery perspective, there’s exclusions for residential accommodation. Is this residential?

SR: Yes, I’m sure the kids’ pods may fall on the right side of the line. I don’t think they would necessarily count as accommodation. But it’s such a difficult question.

RJ: Yes, and that brings into focus again that question around, you know, certain things are very clearly accommodation and others, which are perhaps a more temporary nature that people are only intended to stay there maybe a week at a time, is that residential? It’s an interesting question. I tried to research a little bit before but I didn’t find a definitive answer unfortunately.

LW: We see lots of cases around this in terms of the whole spectrum in other taxes. There’s definitely comparisons across the whole tax code here. But Stephen, why did this case catch your eye?

SR: I think this one’s particularly interesting. One, because it’s a kind of detailed analysis of legislation that we probably remember from our studies and that also we may well come across at some point in our careers. And also the events here are very relatable. I’m sure we can all picture the camping pods, we can all come to a conclusion in our own minds as to what we think. I think, as well, that this is another good illustration of how you can use tax cases to try and predict how HMRC will react to a claim. If you think about some of the lines of argument they used here, for example, like the documentary evidence for a small business, it’s quite good to be able to prepare these things and be proactive. There’s also an interesting point from the case around how they classified the expenditure in their accounts. They classified it as land and buildings rather than camping equipment, because that gave them more accurate depreciation policy. So the camping equipment, I think it was over five years, land and building significantly more than that. And the judge did say that although accounts classification may be relevant, it wasn’t a significant factor here.

LW: How can tax professionals and regulators use these human examples to get the message across?

SR: That’s a really good point and quite timely, I think, as well. Obviously, I’ve worked in tax content for a long time and I’m used to writing about facts and figures. It can be quite difficult sometimes to get the importance of changes across. But I think when you have a bit of a human element to it, people relate to it more. What’s made me reflect on that a little bit lately, I think it’s the whole Post Office thing. We had years and years of this information being out there in the public domain, and we kind of all knew about it, but then it took the ITV drama and to see real people on TV going through it, for that message to cut through. There probably are some lessons to be learned there about how we can convey things like that in the things that we publish. For example, maybe using case studies to illustrate the impact that a rule change has on a person, that human touch.

LW: Well, cases like these make for a great discussion but also highlight how uncertain the rules are for taxpayers. We’ve had a bit of certainty added in, in that companies can now plan their capital expenditure in the knowledge that full expensing will be permanent. But what qualifies for full expensing is still less than certain.

Richard, at Autumn Statement the government said there’d be a technical consultation on full expensing. What’s the scope of this?

RJ: Well, the scope actually isn’t that clear at this stage. This did come, as you say, on the back of the decision to make full expensing permanent. Originally the Chancellor had said it will just be in for three years, and then there’ll be a decision as to when to make it permanent, from a monetary finances point of view. So it’s great news that that’s now going to be permanently on the statute, but only for companies – I do always need to stress that – unincorporated businesses aren’t entitled to full expensing. And just to be clear on what we mean by that, it’s 100% relief, essentially, for qualifying plant and machinery expenditure, with no limit. So the AIA, the annual investment allowance, has been around for 16 years now; that’s always had a limit on it. So this is essentially removing that limit.

But the scope of the consultation, all we’ve really had at the moment is what it’s not going to include. The government have said that they’re not going to change the scope of the type of expenditure that qualifies. That’s going to stay broadly in line with a very small amount of statute and a big body of case law. And also, there’s no expected change to the rate. So it shouldn’t lead to a change in the size of the AIA or the writing-down allowances.

I think the intention behind it is simplification, condensing, reducing the legislation. It’s interesting that the Capital Allowances Act was the first act that was the subject of the tax law rewrite, which was quite early on in my tax career but I have been around long enough to remember CAA 1990, which of course is now 2001. So we might get a brand-new Capital Allowances Act, who knows? But yes, I think that’s the basis – it’s simplification, just making it easier and simpler to follow.

LW: Now, Richard, you did allude to the fact that you’ve got 100% write-offs in a number of places, so companies can effectively achieve 100% write-off of qualifying expenditure under the full expensing rules, or the £1m annual investment allowance. The self-employed also have the £1m annual investment allowance but not full expensing. However, self-employed taxpayers using the cash basis also get full relief for most capital expenditure. Which brings us nicely on to our next topic about changes to the cash basis from 6 April. So, Richard, first of all, what is the cash basis?

RJ: I suppose the starting point is what it isn’t. Before the cash basis arrived, which is about 10 years ago now, all businesses would have to prepare their accounts from a tax perspective using generally accepted accounting principles. So, accruals basis. What the cash basis allowed businesses of a certain size to do was to do away with some of the adjustments that you would need to make in order to prepare those accounts: things like accruals, pre-payments, adjustments for stock, and also certain tax adjustments, like, as we said, capital allowances. So we replace the capital allowances code with a, generally speaking, 100% deduction for qualifying expenditure. The idea was to make calculating profits simpler. That, as I say, has been around for about 10 years now.

LW: What’s changing in April?

RK: There are a few main changes. There was a consultation last year and there were various suggestions mooted and quite surprisingly – at least, I was quite surprised – all of them were adopted. The main change is the default option. At the moment, the default for all unincorporated businesses is accruals basis, whereas from April 2024 it will be the cash basis. So that’s quite a significant change. That’s true for all businesses, except for a certain number that don’t qualify for the cash basis, for example, LLPs, partnerships that have corporate partners.

Up until this point there’s been a limit on the turnover that any business could have in order to qualify for the cash basis. At the moment, that’s £150,000 per annum or £300,000 if the owner qualifies for Universal Credit. One of the key changes is that that limit is going to be totally removed. That’s a really big change. Those businesses will need to think, do we move to the default, if they’re currently under the accruals basis, or do they stick with the accruals basis? There are a couple of extra sweeteners that would help them perhaps make the switch, and they are restrictions that were previously in place. The first one is around finance expenses. At the moment, if you have an interest deduction, that’s limited to £500 per annum if you’re on the cash basis. That limit is going to be removed. Then the second one relates to losses. At the moment if you make a loss under the cash basis, you can’t use that in certain circumstances to offset against the profit. Those restrictions are being removed as well. Really, in essence, the cash basis is being made more generous and more attractive.

LW: One thing that I notice – I’ve seen quite a few comments – is that accountants don’t really like the cash basis. We grew up learning accruals accounting. I’ve seen a few examples out there on social media. Alice and Bob both set up a sweet shop. In their first week, they both spend £1,000 on buying sweets from the wholesaler and they both have sales of £500. The net cash out for both of them is £500. But if we were looking at the accruals basis, Alice makes a profit of £200 and Bob only makes a profit of £100. The difference that accountants would like to make an adjustment for is closing stock. Alice has closing stock of £700 at the end of the first week and Bob has closing stock of £600 at the end of the first week. Alice is obviously doing better, she’s trading better. And it’s those end-of-period adjustments that give us the real business result.

But Stephen, do you think this is an important simplification for the average sole trader?

SR: On balance, I think it is, yes. I’m less impressed by the removal of the turnover restrictions or levels, because I think for the great majority of sole traders, they weren’t really going to be near that kind of limit anyway so it wouldn’t have been a factor. And that kind of reminds me of the annual investment allowance, where the headlines are always about it being increased, but actually that only really benefits a very small percentage of businesses.

I think, what is more impressive is those sweeteners that you talked about Richard, to remove the cap on interest, and to allow greater options for loss relief, particularly for opening years. I think that really benefits the sole trader, they should feel that in their pocket. But at the same time, it just removes those horrible potential pitfalls. I think, yes, accountants are unwilling to adopt the cash basis because they want to give an accurate position of the business. But I wonder if there’s also a little bit of nervousness there as well, to go down a route where you are ruling certain things out, and there’s risk of errors or lost opportunities. So I do think, on those two in particular and on balance, then yes, it is a very important simplification. Great in principle.

LW: My parents were in business and I struggled for years to get them to… well, I never got them to understand accruals accounts. What mattered to them was the money that was in the bank, and did they have enough money to pay their suppliers, and they never liked credit, so they were very much focused on cash. The idea that they had to pay tax if a customer hadn’t paid them, they were, like, well, why do I have to do that?

SR: That’s always been a problem. An even bigger problem is that when you’re dealing with a small company – maybe someone who’s been a sole trader and is incorporated the last couple of years – for people to try and understand how a company is taxed, the fact it’s just not their money any more, it’s just one of the most challenging things in tax, I think. Maybe there’s a point where very small companies will also be able to do something similar.

LW: Yes, that’s a good point. Is this an easy win for the government, do we think?

SR: Yes, I think so, because there’s a simplification bonus for the sole trader. There should be no – if any – cost for the Treasury. So definitely on those terms. Which begs the question, why don’t we see more of these? And I think there’s maybe a wider concern of where we stand with things like this, now that the OTS, the Office of Tax Simplification has gone.

I think, Richard, you alluded to this being 10 years old? I’m pretty sure it started with a recommendation from the OTS. So I do wonder if we, having lost the OTS, does that mean we’ve lost the pipeline for these kind of ideas to come through. But at the same time, when the OTS was abolished, I believe the government said that the intention was to embed simplification in decision making. The other side of the coin is that is this a good example of that inaction? Because it does go much further than the OTS would have first suggested, much further than we all anticipated. Perhaps it is an example of if the government is committed to something, it can move quite quickly on it.

LW: Richard, you alluded to the fact that it’s a key time for businesses that are affected to think about: should I stick with the accruals basis or should I adopt the cash basis? What factors might influence that decision?

RJ: For those businesses that are currently using the cash basis it’s a bit of a no-brainer. It’s become more attractive. I think the key question is, if you’re currently operating on an accruals basis, should you switch to the cash basis, particularly given that there’s no turnover limit now, so even businesses above that £150,000 turnover could now face this decision. In fact, if they don’t make an active decision, they’ll end up on the cash basis anyway, so they do really actually need to think about it.

I think there’s two things to consider here. The first one is the transitional year. If you move from one base of accounting to another one, you will need to make some accounting adjustments to get you from the old basis to the new basis. And that will inevitably have a cashflow impact. It could be positive, it could be negative. Businesses either will do that themselves or they’ll employ an accountant to help them work that out, and that will help them to come to a decision. Obviously, they can make that on a year by year basis. Maybe they don’t do it in 2024, maybe they do it in 2025 or a subsequent year.

The other things to consider are, yes, cash basis is simpler, but if you’re a business of a reasonable size, then you’re probably already tracking debtors, you’re probably already making provisions, you’re probably already tracking your stock and your accruals. If you’re not, probably your risk management isn’t up to scratch. It’s probably not a huge amount of extra cost and admin to convert that into a set of compliant accounts. So I would question the extent to which this is actually going to reduce costs.

One other thing that HMRC have alluded to is the fact that a business on the cash basis gets them slightly closer to the quarterly accounts or the quarterly reporting that’s required under Making Tax Digital, which is true. But if you’re a business that has an accounting year end that doesn’t match the tax year, then you’re still going to have to work out two sets of accounts for each tax year. And so although that gets you one step closer, it doesn’t entirely get you totally in line with what’s required for MTD.

LW: We’re coming to the end of this episode. But to summarise, the cash basis is going to be welcome news for sole traders and small businesses, even if accountants are not so keen.

Many thanks to Richard and Stephen for your contributions, and thanks for listening. If you’ve missed anything we’ve included some links for further reading in the show notes. And if you’ve found it useful, then don’t forget to subscribe so you don’t miss an episode. You can rate and share the podcast too.

We’ll be back next month with the next Tax Track. In the meantime, why not check out the sister podcasts from ICAEW? Insights provides analysis across the world of business, finance and accountancy, while our In Focus series offers more of a deep dive into various topics.

Remember that ICAEW members can join the Faculty for no additional cost. Faculty members receive our monthly Taxline bulletin. In addition, anyone can subscribe to receive our weekly Taxline bulletin containing the latest tax news from ICAEW. Thanks for listening.

sounds like ‘and’ - but possibly ‘embed simplification in decision making’ ? Not sure of sense here

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