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HMRC internal manual

Capital Gains Manual

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Roll-over relief: fixed plant and machinery

TCGA92/S155

The term `fixed plant and machinery’ is not defined in TCGA92 and is therefore to be given its ordinary meaning. From the context of Section 155, it is clear that the term is not used in the sense of fixed capital as opposed to circulating capital or fixed assets as opposed to current assets. If it was used in that sense, there would be no need for Classes 2 and 3. Those classes also deal with plant and machinery which is a fixed capital asset of a trade.

The word `fixed’ is therefore a description of the physical state of the asset in the use to which it is put.

Plant and machinery which of its nature is mobile, is not within Class 1B. Motor vehicles and other wheeled or tracked vehicles (such as heavy tractors) do not qualify (EW Williams & Others v Evans 59TC509) where their function in the trade is as vehicles. Where a vehicle is kept in a permanently fixed position, for example for display in a museum, however, it may be regarded as fixed plant or machinery.

The question of whether an item is fixed plant or machinery is one of fact and degree to be decided by four basic tests.

  1. The first test is whether, in the context of the particular trade, the object is plant or machinery as opposed to, for example, trading stock, or part of a building, see below.
  2. The second test is whether the trader intends to hold the object in a particular location indefinitely for use in the trade carried on by him. For example, if the trade is to hire out the object for use by another, it is unlikely that the lessor intends it to be fixed in the function which it performs in the lessor’s trade. This is so even though it may be fixed in its use in the lessee’s trade.
  3. The third test is whether the location of the object in a particular site is essential to its function in the trade. For example, it will not normally matter precisely where in an office a desk or bookcase is located. If, however, the items are on display in an historic house and are intended to show how a particular historic figure lived and worked, the precise location of the object could be important if it is intended to be historically accurate.
  4. The final test is to consider the nature of the object to determine what means of permanent fixing is available, or necessary, without rendering the object part of the land or buildings and without damaging or destroying the object.

Examples of objects which, although moveable, have been accepted as fixed in the trade use to which they are put include:

  • washing machines and dryers in a launderette, and
  • a fairground carousel of a travelling showman.

Shop fixtures and fittings such as shelves, counters etc and moveable partitions which although static in function can be moved about without too much difficulty and are intended to be moveable to facilitate changes in, for example, layout and display should not be regarded as fixed plant and machinery.

Items such as lifts and escalators which have become part of a building should be regarded as additions to the building rather than as plant and machinery, see below.

Fixed plant and machinery part of building

Section 155 distinguishes fixed plant and machinery which forms part of a building etc from other fixed plant and machinery. The terms `land or buildings’ and `plant and machinery’ are not mutually exclusive. If it is clear that an item of fixed plant or machinery has become part of a building etc it should be treated as an addition to the building. The question is to be determined by the size and nature of the item in question, how, if at all, it has become attached to the building and how easily it could be removed without damaging the fabric of the building.