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This clause confirms that the special rules for
giving machinery and plant capital allowances on fixtures apply
to boilers and radiators installed in a building as part of a
central heating or hot water system.
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It removes doubts that have been expressed over
the correct tax treatment of boilers and radiators that can be
removed easily without damage to the rest of the system or the
building. As the change is made to confirm existing practice and
understanding of the law, it is treated as always having had effect.
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DETAILS OF THE CLAUSE
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Subsection (1) provides for the amendment
of Section 51 Capital Allowances Act 1990 ("CAA").
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Subsections (2) and (3) reorganises the
wording of Sections 51(1) and 51(2). The definition of ‘fixture’
(for the special rules for giving capital allowances on fixtures),
is now wholly contained within the amendment to Section 51(2),
subject to the new provisions introduced as Section 51(2A). Its
meaning is unchanged.
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Subsection (4) inserts a new subsection
(2A) into Section 51. This confirms that boilers and radiators
installed in a building as part of a central heating or hot water
system are fixtures for the purposes of Chapter VI of Part II
CAA.
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Subsection (5) makes a consequential amendment
to Section 51(8) to reflect the changes made to Section 51(1).
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Subsection (6) deems the amendments in
the clause always to have had effect. The clause confirms the
existing treatment and understanding of the law regarding the
treatment of boilers and radiators.
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BACKGROUND
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One condition that must be met for a claim to
capital allowances on expenditure on machinery and plant is that
the machinery and plant must belong to the claimant.
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Special rules for machinery and plant fixtures
were introduced in 1985, following a decision in the Court of
Appeal (Stokes v Costain, 57 TC 688) that a leaseholder could
not claim capital allowances on its expenditure on machinery and
plant fixed in the building it was leasing. The fixtures did not
belong, in law, to the leaseholder. They belonged to the owner
of the land.
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The special rules apply where machinery and plant
is fixed in or to a building or any other land so as to become,
in law, part of the building or land. They provide a comprehensive
code to determine to whom the fixtures are deemed to belong, and
thus who is entitled to claim capital allowances. Broadly speaking,
if a person incurs capital expenditure on the provision of a machinery
or plant fixture, it is treated as belonging to that person even
if legal ownership lies elsewhere.
