01902 711370 / enquiries@uklandlordtax.co.uk / Get In Touch Today

The recent case involving Acorn Venture Ltd (AV) and the First-tier Tribunal (FTT) illustrates the importance of considering the specific characteristics and functions of assets when determining their eligibility for capital allowances, particularly the annual investment allowance. Here are some key takeaways:

Background to the case

The company, Acorn Venture Ltd (AV), purchased 26 camping pods to provide accommodation for school children and teachers on residential trips. The cost of the pods was approximately £272,000. AV claimed capital allowances under the annual investment allowance on its tax return. The overall position was a loss. However, upon enquiry, HMRC disallowed the claim on the basis that the pods were buildings or fixed structures.

1. Function and Characteristics Matter: The FTT made a crucial distinction between two types of camping pods in the claim – “basic” pods and “teacher” pods. The basic pods were considered to have a function similar to a tent and were not considered fixed structures. On the other hand, the teacher pods, with additional features like flushing toilets, washing facilities, and a kitchen area, were deemed more like living accommodation and were treated as fixed structures.

2. Anchoring and Permanence: The decision took into account the fact that the basic pods were anchored to the ground to prevent movement, but this alone did not make them fixed structures. The teacher pods, however, required a greater degree of permanence due to the plumbing fixtures, leading to the conclusion that they were fixed structures.

3. Internal Features vs. External Appearance: The case highlights that while assets may appear identical externally, it’s the internal features and functions that can make a significant difference in determining their classification for capital allowances. In this instance, the internal amenities in the teacher pods led to them being considered more like fixed structures.

4. Capital Allowances Complexity: The case underscores the complexity of capital allowances, and how nuanced decisions can be. It’s crucial for businesses to carefully consider the specifics of their assets and seek professional advice if needed to navigate the intricacies of capital allowances.

5. Detail is Key: The devil is often in the details when it comes to capital allowances. Small differences in the characteristics or functions of assets can have a substantial impact on their eligibility for capital allowances.

In summary, the AV case reinforces the importance of a detailed examination of the nature and function of assets when claiming capital allowances. Businesses should be aware that seemingly similar assets may be treated differently based on their specific features, and seeking professional advice can be essential to ensure accurate and compliant claims.

If you have any further queries on this subject please reach out to us at 01902 711370 or email enquiries@uklandlordtax.co.uk if you have any questions or require our expert assistance.

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG