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Plant and machinery in buildings

Mark Tighe of Catax Solutions explains the theory and practice of claiming capital allowances.

Capital allowances are relevant for almost every business in the UK, as well as for investors in commercial property.

Following the abolition of industrial buildings allowances, which were phased out in April 2011, by far the most commonly claimed allowances in buildings are for expenditure on plant and machinery. This can be found in every commercial building, including offices, medical centres, care homes, retail units, showrooms, hotels, factories and warehouses.

Changes to the capital allowances rules are brought in every year; however the Finance Act 2008 introduced perhaps the most radical changes to the regime, including the concept of 'integral features' and the annual investment allowance (AIA).

This briefing looks at what constitutes qualifying plant and machinery in a building and the practical aspects of claiming allowances. Note that the effects of the subsequent Finance Act 2012 changes, regarding the mandatory pooling of fixtures which affects any commercial property transactions taking place from April 2014, are covered in our briefing Capital allowances: intricacies, myths and reality in July 2014 TAXline.

Plant and machinery: the rules

Before claiming allowances for plant and machinery it is obviously necessary to know what that term encompasses, yet this is often far from clear. Statutory rules introduced in the 1990s went some way to establishing a Airmer definition. However, those rules, augmented by Capital Allowances Act 2001 (CAA 2001), still leave many questions unanswered. It is the area of Aixed or embedded plant – which forms part of the fabric of the commercial building but sits in the background for business purposes – that remains unclear. Examples are installations such as heating and electrical systems.

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

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