With capital and plant allocation rules becoming more confusing, this second article covers the topic of function and the wind turbine.
The Courts found in the Schofield caseagainst Hall (1975) STC353, a grain silo, along with its auxiliary machinery, was planted while performing a function. Taking this decision and the guidance in CA21190, it would appear that not only the wind turbine, but also any apparatus that was required to allow the turbine to operate, qualifies because together they perform a function. That is as long as the additional costs incurred were incidental to the operation of the plant.
In a press release dated March 15, 1984, HMRC stated that “the cost of provision and installation of ducts in connection with the construction of cable television networks is plant and machinery”.
So is it a wind turbine plant? What incidental expenses qualify? Professional fees directly related to the acquisition, installation and transportation of plant and machinery qualify along with planning fees as long as they are specifically related to turbines. I’ll let you decide; Are the fees for the widening of the road and other similar activities payable?
CA21160 indicates that each part of a system must be examined separately and the emission rights claimed only in those parts that are plant. CA22010 disallows major water, electric, and gas services and systems, especially when the expense relates to buildings.
Housing for an electrical substation was denied in the case Bradley v. London Electricity plc (1996) STC231, but this related to the building. It is difficult to consider a turbine in the same way as a building, but ancillary parts are more likely to qualify under CA21180 where: ‘the main switchboard, transformer and associated switch provided that a substantial part of the electrical installation – both equipment such as auxiliary wiring – qualifies as plant’.
This is supported by the recent decision in the case B&E Security Systems and shows that will qualify the incidental expenses associated with the turbines.
Expenditure on ‘an electrical system’ for small-scale turbines is subject to Comprehensive Characteristics Allowance (CAA2001 s 33A (5) (a).
Amortization provisions will be granted at a rate of 10% on a declining balance basis; from April 2012 it will be reduced to 8%.
Relief from capital allowances can make a significant difference to your business and I would always recommend speaking with your accountant to ensure your business is claiming the relevant amounts.
