Owner-Managed Businesses

Definition of plant and machinery

Produced by Tolley
  • 19 Oct 2021 08:10

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Definition of plant and machinery
  • Legislative definition of plant and machinery
  • Buildings and capital allowance expenditure
  • Structures and capital allowance expenditure
  • Exceptions to building and structures (List C)
  • Case law definition of plant and machinery
  • Plant definition ― two-year test
  • Plant definition ― function test
  • Plant definition ― premises test

Definition of plant and machinery

Legislative definition of plant and machinery

The general rule allowing capital allowances on plant and machinery is given at CAA 2001, s 11. There is no statutory definition of the term ‘plant and machinery’ but there is confirmation in the legislation on what constitutes a building or a structure and what is therefore not plant and machinery, and these details are set out below. Otherwise, the definition of plant and machinery has been developed through case law, which is also reviewed below.

The legislation does list some items which do qualify as plant and machinery with the main category of items being integral features, which are described further in the Special rate pool and long life assets guidance note. Other items specifically qualifying as plant and machinery are:

  1. building alterations connected with installation of plant and machinery

  1. demolition of plant and machinery

  1. thermal insulation on a commercial property which is already in use, and

  1. expenditure on personal security assets where there is a special threat to an individual which arises from their qualifying activity

CAA 2001, ss 25–28, 33

Capital allowances are not available for plant and machinery used for business entertainment. Hospitality of any kind counts as business entertainment. However, plant and machinery provided by a business for its employees and directors is not considered to be provided for business entertainment and so capital allowances will therefore be available in this instance.

Buildings and capital allowance expenditure

Buildings are part of the setting in which the business is carried on and do not qualify as plant and machinery. The term ‘building’ includes an asset which is incorporated into a building or would normally be incorporated into a building or is connected to the building, and within the following list:

  1. walls, floors, ceilings, doors, gates, shutters, windows, 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 where lifts, hoists, escalators and moving walkways

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