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UK Tax -Capital Allowances I have a client who has purchased

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UK Tax -Capital Allowances
I have a client who has purchased some wooden pheasant rearing pens. These pens are erected at the beginning of the season ( March)and used to rear young chicks. The huts are fitted out with heaters, water and feeders. Some can be dragged onto fresh ground if muddy and some cannot. They are dismantled at the end of the season (June) cleaned and put into dry storage untill the following year.
Can I claim CA as plant? Cost is approx £10,000.00
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question. The answer to you question is as long as the proverbial piece of string. Here is a summary of the opinion of Davisons, Chartered Accountants on Capital Allowances (CAs) for like structures:
'Careful planning is required to ensure farming clients obtain maximum tax relief on expenditure that at a superficial glance, would not appear to qualify for any allowances.
Providing unboltable sheds are designed and intended to be moved, and are “small” the chances of successfully arguing that it is plant are increased. In order to maximise the opportunities, clients should do the following:
obtain evidence to show they intend to move the building PRIOR to obtaining a quote
ensure they work closely with the contractors at the design stage
Where there is uncertainty as to whether you are able to demonstrate that the shed is intended to be moved, and may not be able to claim relief on the shed itself, maximise the relief to which you are entitled by doing the following:
ensure invoices are split between the core part of the building and the ancillary parts – this ensures that if relief is denied on the main structure, it is maximised on the integral fittings, energy and water related parts
where commercially possible, design sheds where the floor system forms part of an integrated slurry system to maximise the chances of obtaining relief on the cost of the floor'
You can read the full article here:
http://www.davisons-uk.com/sectors/agriculture-a-estates/39
Now these are small sheds designed to be moved which gives a greater chance that HMRC will accept them as attracting CAs. 10K is well within the limits for Annual Investment Allowance which would provide 100% relief.
However, I suggest that this is academic, the accounting equivalent of the again proverbial lemon, for if the expenditure is not allowable as a CA then ot would form part of the cost of sales within the business and again be fully allowable in the Profit and Loss Account. Whichever way the cat jumps your client should receive full relief on the 10K.
I do hope I have helped with this short canter through the accounting possibilities of your conundrum.
Customer: replied 2 years ago.

Sorry, I am not following you. Yes I understand about the heaters and feeder etc but I am unclear about the the sheds which bolt together to erect and then unbolted to put away. Are they plant or not?or are they buildings. Also, I do not understand your reference to writing the cost off as an revenue expense.

Expert:  bigduckontax replied 2 years ago.
Right, the smaller the structure the more likely it is to attract CAs as plant and machinery. If they do then that relieves at the full 10K.
If HMRC jib and refuse, they don't like temporary structures, then the client would merely put the expenditure through his books as a cost of sale which would be allowable at 10K against profits and, in financial terms, have exactly the same effect as would CAs.
Customer: replied 2 years ago.

I see what you are saying, but what are the chances of HMIT arguing that these sheds are building, like greenhouses etc, with no ABA's now available.These shed are approx 20' x 15'.

Expert:  bigduckontax replied 2 years ago.
Well if they do, and it is quite possible, (see the full essay from Davisons), your client merely puts it through his books as a cost of sale and in accounting terms the effect is the same, 100% relief.
Customer: replied 2 years ago.

sorry, if its capital then its a balance sheet item, not a cost of sales revenue expense?

Expert:  bigduckontax replied 2 years ago.
I see where you are going in pure accounting terms, but there is considerable doubt as to whether these temporary structures are actually capital assets in which case passing them through the books as a cost =f sale would be perfectly acceptable.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3590
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Your question was one of those ghastly 6 of one and half a dozen of the other where the solution is a tad indistinct!

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