HMRC have issued new guidance for individuals and businesses who, whilst undertaking a building project, incur professional fees and associated costs and need to determine if they can be included in their claim for capital allowances.
Deciding whether these costs can qualify for plant and machinery allowances has always been difficult and until now HMRC have taken the view that “only the part, if any, which relates to services that can properly be regarded as on the provision of plant and machinery can be qualifying expenditure”. Indeed, in the case J D Wetherspoon plc v HMRC (2007) HMRC maintained that “a trader seeking capital allowances must specifically attribute all expenditure which is capable of attribution, however time-consuming or uneconomic that process may be”.
During the tribunal this view was criticized as this stance would clearly involve the taxpayer having to spend more on attributing preliminaries than they actually cost or the value of the associated capital allowances.
In July 2012, HMRC amended the Capital Allowances Manual at section CA20070, confirming that whether these costs qualify will now be determined on a case by case basis. For some cases it may be necessary to carry out a detailed analysis to determine whether they can be treated as plant and machinery. In other cases, typically small construction projects, it may only be possible to apportion the costs.