IBAs

IBAs

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My client has just purchased a factory unit and has installed a mezzanine floor. The unit is used for electrical and refridgeration engineering work. Part of the mezzanine floor area is being used for office space. Would the factory unit qualify for IBA's and what capital allowances are available for the mezzanine floor, if any?

John Hamilton

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By E3Consulting
10th Feb 2007 13:35

Yes, No, Maybe!
Capital allowances are fraught with complex legislative requirements and a myriad of precedent case law too.

IBAs could be time expired, depending upon the date of construction/first use and what land interest has been purchased, relative to any other existing land interests. Was there any residue of expenditure set out within the purchase documentation or due diligence?

As to mezzanines - some can qualify for plant, other snot - it very much depends upon the type of construction and use. Hunt (Inspector of Taxes) v Henry Quick Ltd and King (Inspector of Taxes) v Bridisco Ltd
[1992] S.T.C. 633 dealt with Mezzanine floors. Where they are in effect 'large shelves - used for storage they will be Plant, other uses particularly offices are unlikely to be eligible and so some pro rata may be necessary depending upon the relative areas or costs.

Typically such industrial premises should yield between 5-15% PMAs and the balance as IBAs - such to any prior claims or restrictions. Please contact us if we can assist as we are property taxation specialists and regularly support accountants and tax advisers on capital allowances claims.

www.e3consulting.co.uk

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By AnonymousUser
12th Feb 2007 09:23

Check out Inspectors manuals
http://www.hmrc.gov.uk/manuals/camanual/CA30000.htm

I recently won a similar case to yours and found these invaluable in playing the inspector at his own game! There are a number of specialists in this area (re previous posting) although I found it quite straightforward once I had a comprehensive understanding of the issues. The key for IBA qualifying use if that the goods are subject to a process i.e. lots of repetition and uniformity but within this there is a huge grey area for you to exploit. Again see the cases in the inspectors manuals for guidance. Also key, is that no more than 25% of total space can be non-production area e.g. offices otherwise the whole lot is disallowed. Conversely, is less than 25% is non allowable then the whole claim is allowed. Modern office walls can be moved quite easlily!

Broadly, If the Mez is moveable then it is plant and if fixed then it is part of the building. Much of the Mez cost, however, may be plant regardless so look at capital allowances act closely ... its all in there!

Hope that helps.

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