A person who is engaged in Qualifying activities can claim capital allowances on qualifying expenditure on plant and machinery

Qualifying expenditure includes expenditure on the alteration of land for the purpose of installing plant or machinery.

For claims on or after 29 October 2018:

  • Capital expenditure on altering land only for the purposes of installing plant or machinery will only qualify for allowances where the plant or machinery being installed also qualifies.
  • Finance Act 2019 includes provisions to amend s21 and 22 Capital Allowances Act 2001.

Legislation relating to plant and machinery is included in the (CAA) 2001 at sections 21 to 23 as follows.

Expenditure which does not qualify for allowances

Expenditure on buildings, structures and land, as well as expenditure on certain assets which are incorporated into buildings do not qualify for capital allowances. 

Section 21: List A - assets treated as buildings

The following assets are treated as buildings, and capital allowances are therefore not available:

1. Walls, floors, ceilings, doors, gates, shutters, windows and stairs.

2. Mains services, and systems for water, electricity and gas.

3. Waste disposal systems.

4. Sewerage and drainage systems.

5. Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed.

6. Fire safety systems.


Section 22: List B - excluded structures, assets and works

The following are treated as structures, and capital allowances are therefore not available:

1. A tunnel, bridge, viaduct, aqueduct, embankment or cutting.

2. A way, hard standing (such as a pavement), road, railway, tramway, a park for vehicles or containers, or an airstrip or runway.

3. An inland navigation: canal, basin, or navigable river.

4. A dam, reservoir or barrage, including any sluices, gates, generators or other equipment associated with it.

5. A dock, harbour, wharf, pier, marina or jetty or any other structure in or at which vessels may be kept, or merchandise or passengers may be shipped or unshipped.

6. A dike, sea wall, weir or drainage ditch.

7. Any structure not within 1-6. other than:

  1. A structure within the industrial building rules.
  2. A structure for the extraction/processing/distribution of gas.
  3. A structure used in the trade of telecoms, TV or radio services.

Expenditure on the construction or acquisition of a structure is treated as being part of the cost of the structure.


Section 23: Expenditure not classed as relating to buildings or structures.

Capital allowances are available in respect of expenditure connected with the following:

  • Thermal insulation of buildings
  • Personal security
  • Integral features
  • Software and rights to software
  • Certain film expenditure

The above assets have their own special rules for capital allowances.


Section 23: List C - assets which are plant and machinery

Note: some items that were on this list were moved by FA 2008 into Integral features, specifically: electrical systems, cold water systems, heating and ventilation systems, lifts, escalators and moving walkways.

1. Machinery (including devices for providing motive power) not within any other item in this list. Note: under this heading comes assets such as vans, trucks, motorcycles, trains, tracked and wheeled machinery.

2. Gas and sewerage systems provided mainly:

(a) to meet the particular requirements of the qualifying activity, or

(b) to serve particular plant or machinery used for the purposes of the qualifying activity.

3. N/a [This item was moved to integral features: space or water hearing systems, powered systems of ventilation, air cooling or air purification, and any floor or ceiling compromised in such systems]

4. Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment.

5. Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings.

6. Hoists.

7. Sound insulation provided mainly to meet the particular requirements of the qualifying activity.

8.Computer, telecommunication and surveillance systems (including their wiring or other links).

9. Refrigeration or cooling equipment.

10. Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires.

11. Burglar alarm systems.

12. Strong rooms in bank or building society premises; safes.

13. Partition walls, where moveable and intended to be moved in the course of the qualifying activity

14. Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades.

15. Advertising hoardings; signs, displays and similar assets.

16. Swimming pools (including diving boards, slides and structures on which such boards or slides are mounted).

17. Any glasshouse constructed so that the required environment (namely, air, heat, light, irrigation and temperature) for the growing of plants is provided automatically by means of devices forming an integral part of its structure.

18. Cold stores.

19. Caravans provided mainly for holiday lettings.

20. Buildings provided for testing aircraft engines run within the buildings.

21. Moveable buildings intended to be moved in the course of the qualifying activity.

22. The alteration of land for the purpose only of installing plant or machinery.

23. Dry docks.

24. Any jetty or similar structure provided mainly to carry plant or machinery.

25. Pipelines or underground ducts or tunnels with a primary purpose of carrying utility conduits.

26. The provision of towers to support floodlights.

27. Any reservoir incorporated into a water treatment works, or any service reservoir of treated water for supply within any housing estate or other particular locality.

28. Silos provided for temporary storage, or storage tanks.

29. Slurry pits or silage clamps.

30. Fish tanks or fish ponds.

31. Rails, sleepers and ballast for a railway or tramway.

32. Structures and other assets for providing the setting for any ride at an amusement park or exhibition.

33. Fixed zoo cages.

The first 15 items here do not include any asset whose principal purpose is to insulate or enclose the interior of the building or to provide an interior wall, floor or ceiling which is to remain permanently in place.


Some examples of AIA qualifying expenditure - from HMRC

Typical examples of plant or machinery, according to HMRC's capital allowances manual include:

  • computers and all kinds of office furniture and equipment
  • vans, lorries, trucks, cranes and diggers
  • 'integral features' of a building or structure
  • other building fixtures, such as shop fittings, kitchen and bathroom fittings
  • all kinds of business machines, such as printing presses, lathes and tooling machines
  • tractors, combine harvesters and other agricultural machinery
  • gaming machines, amusement park rides
  • computerised /computer aided machinery, including robotic machines
  • wind turbines and fibre optic cabling.

Note: these are only illustrative examples; many other assets may comprise 'plant or machinery'.


Specific trades and professions

Property letting exclusions:
Plant and machinery for use in a dwelling house is not qualifying expenditure if the qualifying business activity is Property letting, or overseas letting, or special leasing of plant and machinery. (section 35 CAA 2001).

Special cases

Capital allowances: farming

The definition of a caravan is quite wide as it includes any structure designed or adapted for human habitation which is capable of being moved from one place to another (whether by being towed, or by being transported on a motor vehicle or trailer). This may include items such as shepherd huts if they are moveable as HMRC say in their manual that moveable wooden lodges can be included here.

Recent case law

In Cheshire Cavity Storage 1 Limited -and- EDF Energy (Gas Storage Hole House) Limited v HMRC [2019] TC07301 the FTT dismissed claims to capital allowances on underground gas storage cavities; they were not plant and machinery. The judge said that:

  • a plant-like function does not necessarily make premises plant, in circumstances where the premises also functions as premises.
  • List B and C were not intended by Parliament to be a test of function; they were intended as qualifications on what case law had found to be plant, which was a functional test. The lists were definitive and could not be applied by analogy, e.g. it could not be said that the cavities were within list C because they were like storage tanks, for the list to apply they must be storage tanks.

In SSE Generation Ltd v HMRC [2018] TC06618 the First Tier tribunal (FTT) held that some of the expenditure on constructing a hydroelectric power scheme was eligible for capital allowances as plant; the rest was specifically excluded by CAA 2001.  The allowable expenditure included various tunnels, conduits and caverns carved into rock. The technical aspects of this case make it a lengthy read as the FTT went through each item with great care which shows is the attention to detail required when dealing with large capital allowance claims; items which may at first sight appear to be excluded by the legislation can qualify depending on the specific facts of the case.

In Rogate Services v HMRC TC03449 a car valeting bay was held to be a building, unlike the dry dock in Barclay Curle & Co [1969] 45 TC 221 the building did not function other than as a place to work. The case might have been decided differently if there was, for example, valeting machinery as part of (as a fixture of) the bay that perhaps automated the valeting process.

In Paul Telfer v HMRC [2016] TC05350 the First Tier Tribunal (FTT) found that caravans which the taxpayer had to live in to carry out his employment duties did not qualify for capital allowances.  Although the caravans were not excluded by List A or List B, they were the place in which he carried out his duties rather than something by which he carried them out.


21 September 2016 Added in Telfer case

22 March 2016 minor changes made to clarify links to legislation.

Do you like our webservice? Join hundreds of firms of accountants and Sign Up Now for FREE Nichola's SME tax-updates

tax dog

Do you need Virtual Tax Partner® support?

Paying too much tax? Need assistance in preparing your tax return? Advice on a tax efficient pay package? Create a family investment company?

Any other tax problem? Contact Virtual Tax Partner ® support.

Comments (0)

Rated 0 out of 5 based on 0 voters
There are no comments posted here yet

Leave your comments

  1. Posting comment as a guest.
Rate this post:
Attachments (0 / 3)
Share Your Location