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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowances (PMA): introduction: sampling as a basis of claim - fixtures

Where a taxpayer incurs significant expenditure in a chargeable period on a number of properties that contain fixtures that qualify for PMA, it may be possible to arrive at the amount of qualifying expenditure for those fixtures by means of sampling. For example, sampling may be appropriate where a company acquires a number of similar sized retail units and fits them out in their ‘corporate style’ to create a standard type of shop.

Sampling is acceptable in principle, both as a method for preparing PMA claims and in checking them.

It is not possible to provide hard and fast rules on the method of sampling to be adopted as the facts and circumstances of each case will be different. However, if sampling is appropriate, statistically acceptable sampling methodologies must be adopted.

You should discuss with the taxpayer the size of the sample, and the expenditure included in the sample, which will depend on identifying the relevant population. These discussions should take place before a PMA claim is prepared or checked using a sampling method. Appropriate cases may be agreed without reference elsewhere but the Revenue’s Analysis and Research team may be able to advise on sample sizes and techniques, where necessary.

You should not agree, in advance, claims for future years based on an earlier year’s sample. However, you may decide to examine claims by means of enquiries to identify variances in accounting systems and spending patterns from those previously examined. If there is little variance it may well be that no further enquiry would be necessary into that claim.

Similarly, you cannot automatically roll forward an earlier sampling methodology to similar projects in later years. However, you should be able to judge the extent of sampling required in the later years in the light of work done on the earlier project. The relevance of earlier sampling work to later expenditure may be affected by changes in the underlying statutory provisions and related case law.

If the bulk of expenditure has been incurred before the end of the chargeable period then sampling discussions can begin between you and the taxpayer then. However, you must not agree the extent of sampling before the beginning of a chargeable period.

The above guidance applies only to fixtures. It does not apply to chattels.