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Expert Lu
Expert Lu, Business Consultant
Category: Business
Satisfied Customers: 124
Experience:  ACCA Diploma
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We have a resident society which is a Limited company. The

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We have a resident society which is a Limited company. The Limited company owned 28.4 acres of Woodland which the residents have exclusive use of. The residents are shareholders in the company.
The company does not trade, and has not make a taxable profit. The company simply maintains the land.
The only annual expenses have been PL insurance and Company House return (£186). The only income has come from a Wayleave payment and interest on cash in the bank. (£180), giving rise to a small loss each year.
The company has now be offered a one off Easement payment from UK Power Networks of £13,850. The company intends to use this payment on Woodland maintenance, fencing off the boundary and felling trees etc.
My questions are:-
1. Will the Easement payment be regarded as income?
2. Will money spent on fencing be regarded as an expense and be deducted from the profit?
3. Or will money spent on fencing be regarded as capital expenditure and fall under the rules of AIA and Capital Allowances? Note the fence is being erected to secure the boundary from trespassers.

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Thank you

Thank you for your patience ,after reviewing your question. Easements are treated as a recovery of the basis of the property first, with any excess proceeds treated as capital gain, which is taxed at a lower rate than ordinary income. The basis of property that offsets an easement is limited to the basis of the affected acres in question, to answer the issue of the fence security assets, such as security fencing, at business premises are covered by capital allowances. 'Security assets' are defined by HMRC as “an asset or service which improves personal security”. This will fall under the AIA and capital allowances rules, I am glad I could assist you .All the best .

Customer: replied 1 month ago.
I am not clear what you mean. Do I regard an Easement payment as income?

Hello there ,sorry for not being clear. Yes it is regarded as income, I hope that answers your question.

Thank you and best wishes

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