CA21190 - Plant and Machinery Allowances (PMA): meaning of plant and machinery: lifts, escalators and building alterations
Lifts, escalators and moving walkways are ‘integral features’ for the purpose of CAA01/S33A. See the guidance on integral features starting at CA22300. Treat expenditure on the provision of the wiring that operates a lift, escalator or moving walkway as part of the expenditure incurred on the provision of the asset. This means that it qualifies for PMAs.
You may get a claim that expenditure on installing a lift shaft qualifies for capital allowances as expenditure on the provision of plant or machinery. The lift shaft itself is not plant or machinery. However, expenditure on installing a lift shaft in an existing building should qualify under Section 25 as expenditure on alterations to an existing building incidental to the installation of plant or machinery. Expenditure on installing a lift shaft in a new building does not qualify because Section 25 only applies to expenditure on alterations to an existing building.
Treat capital expenditure on alterations to an existing building incidental to the installation of plant or machinery as if it were expenditure on that plant or machinery and as if the alterations were part of the plant or machinery. The legislation is intended to cover the direct costs of installation, that is those works which are brought about by the installation of the plant and which are associated with it in such a way that their cost can properly be considered to be part of the cost of providing the plant. The use of the word ‘incidental’ makes it clear that the primary purpose of the work must be the installation of plant or machinery. In the Barclay Curle case (45TC240) Lord Reid said that the section covers the case where
‘the exigencies of the trade require that when new machinery or plant is installed in the existing buildings more shall be done than mere installation in order to ensure that the new machinery or plant may serve its proper purpose.’
You should look for a direct link between the incurring of the expenditure and the installation of the plant said to have given rise to that expenditure.
Expenditure on alterations only qualifies if there is a direct link between the incurring of expenditure on alterations and the plant or machinery said to have given rise to that expenditure. There are no plant or machinery allowances for expenditure on additions to a building but only for alterations to an existing building. The main purpose of the alterations must be the installation of plant or machinery. Work done for some other purpose such as the better operation of the asset does not qualify. When you are trying to decide whether expenditure on alterations qualifies under Section 25 as expenditure on alterations incidental to the installation of plant or machinery you should think about what would happen if the plant were removed. Would the ‘installation’ work remain as part of the building or would it be eradicated or abandoned?
Plant is sometimes moved from one site to another. If the costs of removal and re-erection are not allowable as a deduction in computing profits you should treat those costs as expenditure on plant and machinery and give capital allowances on them.