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Capital Allowances Case - Furnished Holiday Let

Capital Allowances Tax Case Review

Furnished Holiday Let Assets Were Not 'Plant'

McMillin (Mrs ME) V HMRC Commissioners [2011] UKFTT 65 (TC)

Tribunal Release Date: 19th January 2011


The taxpayer was unsuccessful in claiming plant and machinery capital allowances for stone floors, windows, painting and decorating, and an earth bund at a furnished holiday lettings development.


The taxpayer was a qualified accountant, who had recently worked as a partner in a major accountancy firm, and represented herself at the tribunal.  She built an ‘eco holiday development’ of four stone holiday lettings cottages in Cumbria.  She described these as being ‘meant to demonstrate the benefits of green design, technology and living’.

Plant and machinery capital allowances were accepted by HM Revenue & Customs (‘HMRC’) for expenditure on assets such as heating systems (including the screed laid above under floor heating).  However, the taxpayer’s view was that the whole site (other than the shell of the buildings) should qualify for capital allowances as ‘plant’, or alternatively all of the disputed stone floors, windows, painting and earth bund works costing about £54,000 in total must be plant.  HMRC disagreed.

Relevant Law/ Practice

Capital Allowances Act 2001 (‘CAA 2001’) section 11 permits plant and machinery capital allowances to be claimed by a business if incurs capital expenditure on the provision of ‘plant’ or ‘machinery’ for business reasons and those assets belong to it for tax purposes.


Machinery takes its everyday meaning so is usually easy to identify.  However, plant is more difficult to define.  Because the meaning of plant can be broad, CAA 2001 generally seeks to clarify what cannot be plant.  Sections 21 and 22 make clear that a ‘building’ or fixed ‘structure’ cannot be plant.  However, there is a long list of exemptions set out in section 23.  The items listed are not ‘buildings’ or ‘structures’, so could be plant, but are not automatically designated as such.  Otherwise, plant is defined by a nineteenth century case about a horse, which the courts still routinely refer to with approval.  This defines ‘plant’, in essence, as ‘apparatus’ used by a business (Yarmouth v France (1887) LR 19 QBD 647).

Tax Tribunal Decision

The first-tier tribunal found in favour of HMRC.  It held that none of the disputed expenditure was ‘plant’.

The tribunal noted that there were only extremely rare cases where entire premises were plant (such as the dry dock in IRC v Barclay, Curle & Co Limited [1969] 45 TC 221) and holiday cottages were not one of them.  The taxpayer had also argued that the cottages were akin to ‘caravans provided for holiday lettings’, as listed in CAA 2001 section 23.  The tribunal disagreed concluding that this specific reference did not include holiday cottages or ‘eco holiday developments’, and holiday cottages were not caravans.

Otherwise the tribunal found that the stone floors and windows fell within the tax definition of a ‘building’.  So they could not be plant. The ‘organic paint’ (which it was claimed helped to ‘clean the atmosphere) was simply part of the ‘premises’ in which the business was carried on (Wimpy International Ltd v Warland [1989] 61 TC 51), rather than the ‘apparatus’ with which it was carried on.  And CAA 2001 section 22 prevented the earth bund from being plant because the works involved the alteration of land.

Finally, the taxpayer expressed dissatisfaction that the law gave greater capital allowances to businesses that developed buildings in non-environmentally friendly ways.  The tribunal responded, rather dryly, that it was not its place to change the legislation, or comment upon its ‘eco friendliness’ or fairness.

Our View

In our view, not surprisingly, the tribunal found no sound basis in the taxpayer’s contentions.

We wonder whether this was a misguided attempt to push the boundaries of the meaning of ‘plant’,’ or perhaps alternatively an instance of an unrepresented taxpayer taking the view that there may be little downside in ‘having a go’ at the tribunal, even if the prospect of success was slim.


View and save  Capital Allowances Tax Case Review - McMillin (Mrs ME) v HMRC Commissioners as a PDF file. 

Tags for this article: capital allowances, plant, furnished holiday let, FHL

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