HMRC internal manual

Capital Allowances Manual

CA27100 - PMA: Assets used partly for qualifying activity: Asset provided for director or employee

Accept that expenditure incurred by an employer in providing an asset for a director’s or employee’s private use as part of a remuneration package, thus giving rise to liability under ITEPA, is incurred wholly and exclusively for the purposes of the qualifying activity. This means that the expenditure satisfies the wholly or partly for the purposes of the qualifying activity condition for being qualifying expenditure CA23010.

If the asset is machinery, the company’s capital allowance claim should be accepted. Assets that are machinery include cars, aircraft, yachts, washing machines and dishwashers. If the asset is not machinery, the company is only entitled to capital allowances if the asset functions as plant in its qualifying activity. For example, assets such as paintings and furniture provided for the director’s home are unlikely to be plant. They will not be apparatus with which the company’s trade is carried on.

The fact that the director or employee is being charged under ITEPA on the benefit does not necessarily prevent the company from being refused capital allowances on the asset. Before you challenge a capital allowance claim, however, you should make a full report of the facts to BAI (Technical).

If there is a blatant incongruity between the asset provided for the director or employee and the commercial requirements of the business, you may be able to use the case of G H Chambers (Northiam Farms) Ltd v Watmough, 36TC711 to restrict the capital allowances on the grounds of personal choice.