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Sink or swim

Ray Chidell considers a recent capital allowances case that raises interesting points on apportioning expenditure.

The decision in the case of Bowerswood House Retirement Home Ltd v HMRC TC04299 was released in early March 2015.

The case concerned the treatment of a conservatory-type enclosure for a swimming pool at a retirement care home in the north of England. The fundamental approach of the First-tier Tribunal was never in much doubt (especially as the Dirst recorded fact was that 'the appellant did not rely on any evidence'!) but there were some interesting discussions along the way. The case also brings out some important issues in relation to the whole approach to apportionments when buying an existing property.

Allowances for the conservatory

The essence of the taxpayer argument was that the conservatory enclosing the pool should qualify for plant and machinery allowances as it 'was essential to the enjoyment of the swimming pool because the likely users would be aged in their 70s and 80s'. However, this point was dismissed quite simply by the tribunal, as the conservatory was clearly a structure and the fact that it was used to provide shelter and warmth for residents of the nursing home did not alter that conclusion. It performed the functions of a building.

It was argued for the taxpayer that the conservatory was an integral part of the pool itself, and qualified on that basis. However, the tribunal quoted various case law precedents for treating buildings and structures as separate assets from the plant and machinery that they house. Furthermore, the tribunal commented that 'the provisions of List C are so prescriptive that we have no doubt parliament would have expressly referred to buildings or structures enclosing swimming pools if it intended they should qualify for capital allowances'. Therefore, it was held that the conservatory did not qualify as plant.

This is an extract from an article in the April 2015 edition of TAXline, the magazine of the Tax Faculty.

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