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HMRC internal manual

Inheritance Tax Manual

Land and buildings, machinery and plant: Machinery or plant

The IHTA 1984 does not define either ‘machinery’ or ‘plant’. For the purposes of IHTA84/S105 (1)(d), we treat the expression ‘machinery or plant’ as including those assets, and only those assets, which are treated as machinery or plant for Income Tax (IT) purposes.

By reference to IT case law, the broad requirements for equipment to be ‘plant’ for the purposes of IHTA84/S105 (1)(d) are that it:

  • functions as part of the means by which the company or partnership carried on its business (other than stock-in-trade bought or made for sale), and
  • has a working life of two years or more.

Accordingly equipment (but not stock-in-trade) used by a company or partnership and claimed to be “machinery or plant” can in general be accepted.

In appropriate cases, however, it will be helpful to check the treatment for IT purposes. For IT, equipment may be entitled to either:

  • a writing-down allowance on a percentage basis if it is machinery and plant, or
  • an allowance on a renewals basis, i.e. by reference to the actual expenditure on replacement, if it is not machinery and plant.

Accordingly equipment should be treated as plant or machinery where:

  • writing-down allowances have been given in respect of it (ignore the possibility that in strictness the renewals basis may have been appropriate for some of the items), or
  • writing-down allowances have not been given in respect of it, if it is clear on enquiry that this has occurred for some reason unconnected with the nature of the equipment (for instance because in the particular case neither form of allowance can be claimed, or because the renewals basis has been adopted for convenience).

In exceptional cases of doubt or difficulty as to whether items in respect of which relief is claimed are properly within the description of machinery or plant refer the matter to Technical.