The shed has been erected and together with plumbing in electricity etc cost about £3,000. It is to be used for making curtains and cushions loose covers etc in my client's trade. Does this meet the 'manufacturing' requirment ? If so, is there any other reason preventing a claim for IBA
Ian Riley
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Capital allowances manual
In the Revenue's Capital Allowances Manual para CA1714 it says:
"You should treat temporary huts which are moved from one site to another and used by builders and contractors to provide canteen and toilet facilities or as storage sheds as site plant. They will then qualify for machinery or plant allowances."
Could you mount an argument for machinery and plant allowances using this?
I would claim capital allowances not IBA
Ian,
I would try to claim capital allowances because the rates are quite attractive. IBA rates are lower than CA.
Also, in my opinion, a shed is nothing more than a temporary moveable partition and thus may qualify as P&M relatively easily than an industrial buildings.
Moveable shed?
Unless you want an argument you are unlikely to win IBAs would be easier if less lucrative. Moveable partitions are what they are, and a building with a roof and a floor would be construed as premises and not eligible for P&M allowances. You would See Capital Allowances Act 2001 Section. A genuine manufacturing process should be no problem as you own the relevant interest. There is no harm in taking out the cost of P&M installations separately such as heating, vent, electrical installations to run equipment etc.
Thanks Guys
I had considered CA's but concluded that a shed would never be classed as plant and machinery.
yes you can claim IBA's
a garden shed would be construed as a 'structure'
any buiding or'structure' in use for a qualifying trade, such as manufacturing, would be eligible for IBA's at 4%.
before claiming IBA's, as suggested below, I would strip out the items within the cost of the whole 'structure' realting to plant and machinery and claim 25% WDA on these items.
The balance will be your eligible IBA cost.
Refer Inland revenue CA Manual at CA1030 and CA 1040 (even mentions garden sheds !!!)
IBA
One of my early clients owned a garage, but the previous accountant had claimed IBA on the buildings and the inland revenue had accepted this without question. I immediately stopped claiming IBA, and had to tell my client all that had been claimed already would be clawed back with a balancing charge. Fortunately the profit on the sale of the garage was so high it did not matter too much.
Capital and other allowances are only intended to write an asset down to it's final sale price. To do more than this, is merely asking for trouble.