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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowances (PMA): introduction: restricted meaning of ‘on the provision of’

The condition that the qualifying expenditure must be incurred ‘on the provision of plant or machinery’ should be interpreted narrowly. The case of *Ben-Odeco Ltd. v Powlson, 52TC459 * showed that remote or indirect expenditure does not satisfy this condition, and therefore does not qualify for PMA. Transport and installation costs of plant or machinery satisfy this condition however and can therefore qualify for PMA.

Ben-Odeco Ltd borrowed a large amount of money to finance the construction of a oil-drilling rig and charged the commitment fees and the interest to capital. It claimed capital allowances on the commitment fees and interest on the loan as part of the cost of the rig. The House of Lords refused the capital allowance claim because the commitment fees and interest were not expenditure on the provision of the rig. They were expenditure on obtaining funds with which to acquire the rig.