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UK: Structures defined for capital allowance purposes

UK: Structures defined for capital allowance purposes

A court decision concerns the definition of a structure for capital allowance purposes, and guidance from HM Revenue & Customs (HMRC) concerns structures and buildings allowance.


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The Upper Tribunal decision considers the definition of a structure for capital allowances purposes. In this case, the taxpayer spent £300 million on a hydroelectric power generation scheme and claimed capital allowances totalling £260 million. HMRC disputed a total of £227 million, and the case went to the First-tier Tribunal (FTT). Agreeing with the taxpayer, the FTT held that the majority of the disputed items were eligible for capital allowances. On appeal to the Upper Tribunal (UT), HMRC challenged the eligibility of a number of items, including water conduits between the water intakes and the main reservoir (used for gathering water into the reservoir), the headrace (carrying water to the turbine) and the tailrace (carrying water away from the turbine into Loch Ness) on the basis that the reliance on Item 22 in List C was incorrect. The taxpayer counter that the FTT had erred in finding that a number of assets were aqueducts, and that Item 25 of List C (pipelines) was to have applied. The UT affirmed the FTT decision, but under a different technical analysis. The case is a useful reminder that when construing statutory language, words normally are given their standard English meaning (here, whether the asset would be a plant at common law). The result of the UT’s determination is that all the assets falling under Item 7(a) of List B and are not considered “structures” for capital allowances purposes. Read a November 2019 report prepared by the KPMG member firm in the UK

HMRC in early November 2019 published guidance on structures and buildings allowance within the online Capital Allowances Manual. In general, the structures and business allowance provides tax relief for expenditure on structures and buildings (the main exclusion being residential buildings). Relief is available for capital expenditure on new buildings and extensions/refurbishments of existing premises, when all contracts for construction work were entered into on or after 29 October 2018 and the works commenced after that date. Read a November 2019 report prepared by the KPMG member firm in the UK

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