What Can You Claim as Capital Allowance? A History of Vagueness

Most business owners are familiar with capital allowances. For anyone who isn’t: capital allowance can be claimed as assets used in your business and can be deducted (partially or in whole) from your taxes. The main groups capital allowance claims for are: plant and machinery, patents, flat conversions, and business renovations. There are many more that can be added to this list and full guidance can be found listed by the government.

However, over the years, people have found ways to claim for…well, just about anything, especially when it comes to the plant and machinery subcategory.

To the ordinary person, a ‘plant’ may conjure to mind nature. Raw produce, perhaps. For others, particularly those in court rooms, plant can mean very different things. Dating back to 1987, in Yarmouth vs. France, a man argued his horse was plant as it helped him continue with his business. His argument was that the horse was not a pet or companion, nor livestock, as the horse was vicious – it had kicked him. He deemed the horse a necessity to the business and travel as he didn’t want to keep the violent horse around, but he had no choice; his business depended on it. The case was eventually won, and a new definition of ‘plant’ came forward: apparatus that is used for carrying out business. Oddly, this could be argued as anything alive or dead.

And so began the endless war to declare everything and anything as essential equipment to carrying out business.

Which is by Munby vs. Furlong went on to argue that books could be ‘plant’ for lawyers as these are essential to carry out practise. More recently the case of Mallalieu v Drummond sets to argue that clothes – business attire – could be classed as ‘plant’ and in turn, a capital allowance. This is still an ongoing dispute. While uniforms are more accepted, individual clothing choices are up for debate.

Pubs have had outdoor gazebos deemed ‘plant’ in Andrew  HMRC Capital Allowances Commissioners. This came into the courts after the 2007 smoking ban in pubs. Pub owner, Andrew, argued that the new addition of an outdoor gazebo was plant as it wasn’t part of the permanent premise, and was crucial to the business as smokers needed a place to go as they could no longer smoke inside. Andrew won the case.

In a similar vein, Cooke vs. Beach Station Caravans have since argued that a swimming pool is ‘plant’. In definition, water is quite contrast to a plant. But to the vague definition of ‘plant and machinery’, Beach Station Caravans argued that a swimming pool was deemed as plant as it was used to help the trade of the caravan park.

However, there were limits to this ruling. Indoor pools – and even changing rooms – cannot be filed as ‘plant’ due to being deemed a permanent premise. There have been many more examples of people listing random and varied expenses as ‘plant’ capital allowance. Since the first court case, it’s said that the ‘the dividing line between what is ‘plant’ and what is not is a narrow one’ (Jarrold v John Good & Sons Ltd), and I think these cases exhibit exactly that.

It might save you a lot of time and hassle (and legal fees) to not argue every expense as a ‘plant’, but it just goes to show: if you can argue your case well enough, you might just win.