B3.303 General conditions for plant and machinery allowances
Plant and machinery allowances are available if a person carries on a 'qualifying activity' and incurs 'qualifying expenditure'1. Allowances must be calculated separately for each qualifying activity which a person carries on2.
For the meaning of 'qualifying activity', see B3.304.
Subject to other provisions in the legislation, the general rule for 'qualifying expenditure' (see B3.305) defines it as capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring it, where that person owns the plant and machinery as a result of incurring it3.
As to the time when expenditure is incurred, see B3.104. For the meaning of capital expenditure, see B3.103, For the meaning of 'plant' and 'machinery', see B3.306. See B3.359 for allowances in respect of assets provided or used only partly for qualifying activities.
Purpose of expenditure
HMRC has sought to argue that capital allowances should be denied in circumstances where, looking at the matter as a whole, the purpose of the expenditure should be regarded as not being the acquisition of plant and machinery, but instead the obtaining of capital allowances under a transaction having no commercial reality. This was the contention in Barclays Mercantile Business Finance Ltd (heard by the Special Commissioners as ABC Ltd)4 where there was a complex and convoluted series of transactions involving seven companies which sought to claim writing-down allowance on £91m spent on purchasing