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Mezzanine Floor Installed in Rented Building Tax Position

Mezzanine Floor Installed in Rented Building...

Help would be appreciated please. A partnership rents a factory and has incurred costs in installing a mezzanine floor for office use. Am I correct that the build costs( floor, window,electrics etc) are treated as improvements to leasehold property and only allowable against any capital gain on disposal of the lease? There is also a cost for soundproofing the floor as there is a noisy machine underneath and clients were worried about health and safety for office staff. Is this allowable (capital allowances?) or is it part of the lease improvement?


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08th May 2012 13:13

It depends how it was built

If it is a permanent fixture then I guess it will be leasehold improvements:  However most mezanine floors that I have come across (quite a few!) are of modular construction and can be dismantled and removed later; it may even be that the lease would demand that on relinquishing the property.  If that is the case I would call it F&F, sound insulation and all.

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08th May 2012 13:27

integral features - and industrial lease

There are (recently) new rules for property expenditure

most of the limitations relate to residential let property(and whether or not it is furnished)

As the lease is a commercial lease there are not many aspects of capital expenditure that (DONT) qualify for capital allowances. but the capital allowances are restricted to 10%.

even industrial buildings allowances have been(almost) phased out

assuming the landlord will not reimburse the partnership under the lease and ongoing repairs are the partnerships' responsibility:

 If you want to claim AIA's look at HMRC LIST A and LIST B in the Capital allowances act 2001 otherwise the rule is:

"expenditure which brings ‘into existence an asset or an advantage for the enduring benefit of the trade’"

" systems provided specifically for the purpose of the underlying business may in certain circumstances be treated as plant and machinery, for example, lighting and plumbing for the toilets in a restaurant."

" goods and chattels (fixed or moveable) for enduring use within the business"

" ·                     some kitchen equipment

·                     bathroom suites, and some fittings

·                     fire alarm systems, elevators lifts, heating systems

·                     CCTV

                            burglar alarm systems   "

thermal insulation qualifies for 10% under "integral features" rules

also consider whether the item is a "renewal" under repairs and renewals rules so you can claim revenue relief.


the sound proofing(if the partenrship already rents part of the factory for other purposes would be a repair item

health and safety also a revenue claim item.

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08th May 2012 14:15

Floors don't qualify for P&M CAs

The other responses seem a little off to me.  I think Richard's considering it more from an accounts classification point of view though.

Generally speaking, HMRC will argue that a mezzanine is just the insertion into the building of intermediate floor space (unless it's used as a shelf), and floors are part of a building. See CA22070.

There will obviously be an element of integral features as David suggests though, qualifying for AIA or WDAs at 10%/8%. The electrics, etc. See CA22300 onwards.

The sound proofing isn't a repair though. It's capital expenditure, which is also plant, and so qualifies for AIA or WDAs at 20%/18%. Your AIA should go against the integral features first to maximise allowances.

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By plummy1
08th May 2012 22:10

Floors don't qualify for P&M CAs unless:-

A mezzanine floor will also qualify where it is specifically installed for the support of qualifying plant and machinery. This seems to be implied at the end of CA22070. Therefore if a mezzanine floor supports offices the expenditure on the mezzanine would itself would not qualify. If however the mezzanine was to support a cold store or a vault or other plant/machinery all expenditure would qualify for capital allowances.

We have spoken to accountants in the past who have claimed on mezzanine floors (in error) when offices have been built on them.




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