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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific deductions: repairs and renewals: what is a repair: changing technology

In the same way as the use of more modern materials does not necessarily mean work is an improvement (see BIM46920), the use of new technology as part of a repair does not necessarily mean the repair becomes an improvement.

In such circumstances, the position is that:

  • the work is a repair and not an improvement if after the work is carried out, the asset can just do the same job as before;
  • the work is an improvement and disallowable as capital if, as a result of the work, more can be done with the asset, or the asset can be used to do something that it could not do before.

When the work is done can be important in deciding whether changes in technology have led to an improvement. As technology changes over time, something that would be accepted as an improvement in year one may by year five be simply a repair. This is because that technology is no longer seen as an improvement and is simply what is used for the job; it has become the industry standard for that type of work. Using that technology does not change the character of the building.

One example of this is double glazing. At one time, replacing single glazed windows with double glazing was an improvement. Over time, double glazing became the industry norm. This meant that replacing single glazing with double glazing ceased to be an improvement, and capital expenditure, and became allowable expenditure for tax purposes as it was simply replacing like with currently available like.

For more detailed guidance on this point, see BIM35455.

In borderline cases it is worth considering whether the character of the asset has changed; see BIM46950.

Example 1

Tony has the water sterilisation system in his factory replaced. He cannot replace it with an identical system as it was designed using imperial measures. He uses piping and storage tanks of the closest available metric size. This results in a slightly increased capacity.

In this case it is not an improvement. The trivial increase in performance or capacity arises solely from the replacement of old materials with newer but broadly equivalent materials.

Example 2

George runs the family business from premises built in the 1960s. The electrical system dates from when the premises were built and George decides to have them replaced. He installs a system of greater capacity to cope with additional electrical equipment that he is installing.

George has not simply replaced his outmoded system with a modern system. This is an improvement and is capital expenditure.

An electrical system of a building is an integral feature for capital allowances purposes. As a result George may be able to claim capital allowances at the lower rate, see CA22310 onwards.