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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowances (PMA): meaning of plant and machinery: décor

*C.I.R. v Scottish & Newcastle Breweries Ltd. 55TC252 *also involved the setting in which a trade was carried on. The company spent money on light fittings and wiring, and decorative items such as wall plaques, tapestries, murals, prints and sculptures. It claimed plant or machinery allowances. The Inspector refused the claim and the company appealed to the Special Commissioners.

The Special Commissioners found that the electric wiring was part of the fabric of the building. They found that everything else was plant on the grounds that everything but the electric wiring went to create the atmosphere or ambience that it was an important function of the company’s particular trade to provide for its customers to resort to and enjoy. They therefore found that the light fittings and decorative items satisfied the functional test required of plant despite the fact that they formed part of the setting within which the trade was carried on.

The Inspector appealed against the Special Commissioners decision. The company accepted the decision that the wiring was not plant. Both the Court of Session and the House of Lords rejected the Inspector’s appeal.

In the House of Lords Lord Lowry said “something which becomes part of the premises, instead of merely embellishing them, is not plant, except in the rare case where the premises themselves are plant, like the dry dock in Barclay Curle or the grain silo in Schofield v Hall” CA22050.  The items in the Scottish and Newcastle case on which capital allowances had been claimed were part of the setting but they were not part of the premises.

Lord Cameron said “The problem which the Commissioners were called upon to solve was one concerned with a ‘service industry’. I think this factor is important because the question of what is properly to be regarded as plant can only be answered in the context of the particular industry concerned and possibly in light also of the particular circumstances of the individual taxpayer’s own trade”.

Later on he said “I think that the Commissioners rightly applied their minds to the proper initial and fundamental questions which they had to answer - the meaning of plant in its statutory context and as applicable to the trade carried on by the taxpayer”.

Decorative assets are likely to be caught by CAA01/S21 - S22 and not to be plant, except where they fall within item 14 of list C CA22030. This covers decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades. You should only accept that items of decor are plant if the taxpayer can show that:

  • the trade involves the creation of atmosphere/ambience and in effect the sale of that ambience to its customers, and
  • the items on which plant or machinery allowances are claimed were specially chosen to create the atmosphere that the taxpayer is trying to sell.

For example, a painting on an accountant’s office wall that is owned by the accountant is not plant because selling atmosphere is not part of an accountant’s business.