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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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Plant and Machinery Allowances (PMA): buildings and structures: expenditure on integral features: definition and related provisions

CAA01/S33A, S33B and S104A

Integral features - definition

The new rules on integral features apply where a person carrying on a qualifying activity incurs expenditure on the provision or replacement of an integral feature for the purposes of that qualifying activity. Each of the following is an integral feature of a building or structure

  1. an electrical system (including a lighting system),
  2. a cold water system,
  3. a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
  4. a lift, an escalator or a moving walkway,
  5. external solar shading

Only assets that are on the list are integral features for PMA purposes; if an asset is not one of those included in the list, the integral features rules are not in point.

The rules also specifically clarify that the new definition does not extend to any asset whose principal purpose is to insulate or enclose the interior of a building, or to provide interior walls, floors or ceilings which are intended to remain permanently in place (S23(4) & S33A(6)). So if, for example, a business installs a new, permanent false ceiling in its premises, in order to conceal new wiring and service pipes, expenditure on that ceiling would not qualify for PMAs.

On the other hand, if a business installs in its premises a plenum floor or plenum ceiling, the principal purpose of which is to function as an integral part of the heating or air conditioning system (for example, the plenum floor or plenum ceiling may form the fourth side of a duct or channel through which stale air is extracted and treated air is discharged), that expenditure would qualify for PMAs as part of an ‘integral feature’ of the building or structure (CA22070 & CA22080).

Special rate of WDAs

FA08 introduced a new Chapter 10A to CAA01, which contains the rules governing ‘special rate expenditure’, which must be allocated to the ‘special rate pool’ and in respect of which the person incurring the expenditure may be entitled to WDAs at the ‘special rate’. Expenditure on the provision or replacement of integral features is one type of special rate expenditure (S104A (1) (b)). Other types are expenditure on thermal insulation and expenditure on long-life assets. The rate of WDA for the special rate pool is reduced from 10% to 8% from 1 April 2012 (CT) and 6 April 2012 (IT).

Expenditure on ‘Integral features’ (S33A CAA01) is added to the list in S23 (2) CAA01. Thus, expenditure on a building’s water or electricity system, for example, is now expenditure on a specific ‘integral feature’ (as above), and the normal rule that expenditure on such a main services system of a building should be regarded as expenditure on the ‘building’ (rather than on P&M) - in terms of S21(3)(c) - is disapplied.

List C at S23(4) CAA01 is amended. Previously, business expenditure on (say) a lift, (which was an item in List C) could be regarded as expenditure on P&M that might attract PMAs at the main rate, despite the fact that a lift might otherwise have been regarded as part of the ‘building’ in terms of S21. Now items that were previously in List C, and so might have qualified for main rate PMAs, but which are now listed as ‘integral features’ in S33A, have been duly deleted from List C. The amendments to List C are as follows:

The previous reference at item 2 to:

Electrical systems (including lighting systems) and cold water [systems provided mainly - (a) to meet the particular requirements of the qualifying activity, or (b) to serve particular plant or machinery used for the purposes of the qualifying activity

is omitted. This removes the previous special treatment for ‘trade-specific’ or ‘P&M-specific’ electrical and cold water systems. Now, all businesses’ expenditure on all such systems may be entitled to WDAs at the rate for the special rate pool as ‘integral feature’ expenditure on an equal footing.

The previous reference at item 3 to:

Space or water heating systems; powered systems of ventilation, air cooling or air purification; and any floor or ceiling comprised in such systems

is omitted, as now included as an integral feature asset above.

The previous reference at item 6 to: ‘Lifts…escalators and moving walkways’ has been omitted, as these items are now specified as integral feature assets (see above).