Only basic camping pods qualified for capital allowances

In Acorn Venture Ltd v HMRC [2023] TC09006, the First Tier Tribunal (FTT) found that basic camping pods provided to school children for residential adventure holidays qualified for plant and machinery capital allowances. Pods with greater facilities, for teachers, did not qualify for Capital Allowances.

• Acorn Venture Ltd (AVL) was a tour operator, providing residential adventure holidays for school children.
• In the period ended 30 September 2015, AVL purchased 26 ‘camping pods’ in respect of which it claimed the Annual Investment Allowance (AIA).
  • 20 of the pods were for use by children and were known as ‘Basic Pods’.
  • The remaining six pods were known as ‘Teacher Pods’; these were for use by accompanying adults.
• The camping pods:
  • Did not have walls or roofs in a traditional sense. They looked like upturned boats.
  • Had windows, lockable doors, and solid walls/roof.
  • Benefited from an electric hookup, which provided lighting. This was of a standard type for a mobile or static caravan.
  • Were sited on a pre-existing hardstanding area. Each sat on a wooden frame attached to breeze blocks cemented to the ground. Pods were anchored to prevent movement.
• Basic Pods had five beds whereas Teacher Pods had two beds. These beds were of a timber construction, built into the pod.
  • The Teacher Pods had flushing toilets, washing facilities and a small kitchen area.
• Following an enquiry, HMRC issued a Closure notice in August 2022 reducing AVL’s capital allowance claim on the camping pods by £286,000.
• AVL Appealed to the First Tier Tribunal (FTT).

The FTT found that the Basic Pods were Plant, meaning that capital allowances were available:

• While they were a structure, being assembled primarily from timber to form a solid object, the Basic Pods were not a fixed structure on which allowances would have been precluded under s.22 CAA 2001.
  • Although the Basic Pods were heavy and rested under their own weight, they were only anchored for safety. They could not be considered 'fixed'. 
• The Basic Pods lacked sufficient substance to be considered buildings.
  • They were not fixed to the ground and did not have the appearance of a conventional building.
  • The Basic Pods did not provide living accommodation. They were a crude place to sleep with a degree of shelter which was not significantly more than a tent; they performed the same function.
  • As the Basic Pods were not buildings, allowances were not precluded by s.21 CAA 2001.

The Teacher Pods did not qualify for capital allowances:

• The Teacher Pods were fixed structures, meaning that allowances were precluded by s.22 CAA 2001.
  • The Teacher Pods had a permanent foul water drain to which the pod was attached.
  • These plumbing facilities rendered the Teacher Pods fixed as it required them to be fixed in a place with access to the underground drain with a degree of permanence.
• The Teacher Pods were buildings, precluding allowances under s.21 CAA 2001.
  • Despite being identical to the Basic Pods in external appearance, the Teacher Pods were fixed to the ground and were akin to living accommodation, providing sufficient security and shelter.
  • There were more facilities in the Teacher Pods, with a greater level of comfort. This meant that the substance of the shelter afforded to occupants was greater.
  • Although the Teacher Pods were moveable, AVL did not have the intention to move any of the pods in the course of its qualifying activity. The disapplication of the exclusion for buildings in Item 21 List C did not apply.

The appeal was allowed in respect of the Basic Pods.

Back to Nichola's Weekly Tax-Update 7 November 2023

Useful guides on this topic

Annual Investment Allowance (AIA)
What is the Annual Investment Allowance? What are the limits? What expenditure qualifies? 

What expenditure qualifies for plant & machinery allowances?
What is plant and machinery? What expenditure qualifies as plant and machinery? What is treated as part of a building? 

Plant & machinery: Allowances
What capital allowances are available on plant and machinery? How do you calculate them? What are qualifying activities?

Structures & Buildings Allowance (SBA)
Who can claim the Structures and Buildings Allowance? What expenditure is eligible? How to make a claim? 

How to appeal an HMRC decision
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Closure notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights? 

External link

Acorn Venture Ltd v HMRC [2023] TC09006