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PMA or SBA on astroturf tennis courts?

Correct tax treatment for various costs of constructing astroturf tennis courts for a tennis club.

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Hi,

Many thanks in advance for reading my essay!   I have done quite a lot of research and still am not 100% sure of the answer so I'd appreciate any advice you can offer.

My clients set up a limited company with the intention of setting up a tennis club.  The company leases land from a sports club.  Over the past year, they have built some astroturf 'padel' tennis courts (not quite the same as normal tennis courts as they have glass and steel walls, possibly this is relevant).  The tennis club is now up and running and receiving income from members using the courts.

I'm in the process of preparing the year end accounts and corporation tax return and have come to the question of how to treat the expenditure incurred on building the courts (from a tax perspective, accounting perspective is more straight forward).

I have read a lot of the various pages within CA20000 (Plant and machinery allowances) as well as the structures & building allowance stuff.  My question is - should this expenditure be treated as plant, or as a structure.  It seems as if different bits of the guidance point me in different directions.

The SBA guidance would suggest I could treat it as a structure, and I think it would qualify for the SBA.

''You should treat something as a structure if it has been erected or constructed and is distinct from the earth surrounding it.

  • Examples of structures include (but are not limited to):...hard tennis courts. ''

Fine, but I also think it might qualify as plant, which would clearly be preferable.  There is even a particular piece of guidance about artificial playing surfaces, but I read this and was no clearer really.  The tennis court is obviously a setting, but in my opinion, also the apparatus by which the trade is carried out, and is the means of generating profit.  So I'm leaning towards treating the costs as plant.  Could I please have your opinions and/or previous experience?

For more detail, the construction costs are broken down as follows.  I realise that some of these eg the gates and the road, are likely to be specifically excluded from being plant and therefore would have to be structure.  I'm hoping the first four costs in particular, are what I could include as plant and maybe the lighting along the access road.

 
Construction Works totals £38,514 – this is the creation of the foundations to hold the Padel courts in place. The surface was also levelled.
Padel Courts cost totals £ 55,182 – these are the glass and steel Padel courts themselves (around the 'walls' of the court)
12mm Glass £2310 – this is an extra thick glass for safety (around the 'walls')
Blue Monofilament Turf - £840 – this is the ‘astroturf’ playing surface.
3m x 2m Spare Glass lx 2m x 2x Spare Glass Fencing £840 – spare glass panel in case of breakage.
2Nr Clubspark Gates Entrance -£11,900 – this is the Access control gate system that allows people to book a court online and then enter an access code to get to the court. It means you do not need to have staff on site to take money for the courts and it also secures the site/ courts.
Access Paths Upgrade Road and Carpark - £6,600 to create a new type 1 road and parking area. To get from the car park/ entrance to the courts we layed an asphalt pathway - £2749
Lighting and access control gates – £3337 this is a separate security gate lock on the perimeter of the site. Also lighting all along the new road and car park.

Final thought - the company is loss making this year.  I haven't really had time to think this through yet but just adding it quickly as I've run out of time.  If any of the above is plant, would you claim the super deduction?

Thnak you very much for reading.

Donna

 

Replies (11)

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By David Ex
20th May 2022 15:32

With spend of over £100,000, think I’d be getting some specialist input.

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Replying to David Ex:
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By donnameneses
20th May 2022 16:09

Thank you. How would I find a specialist? Just do a search for accountants who specialise in capital allowances? Or do they have a specific name? (sorry, sounds like a stupid question!).

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Replying to donnameneses:
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By DKB-Sheffield
20th May 2022 16:26

Sorry to [***] in...

Sounds like you just need a CA specialist as you sound like you have most other things covered. There are many out there that specialise in CAs - some for a fixed fee, others on a percentage basis. They'll assess everything to do with the build. I'd be inclined to 'guide' your client, as opposed to seeking the advice directly (you don't want a client negligence claim for other's work).

As you suggest, the accounts and tax returns seem fairly urgent, and you may struggle to get it all resolved on time! Don't hold off on filing the return! The CA claim can be made later (amending return with report - if relevant). As you state there is no profit, so the CA claim will only go toward an increased loss.

Edit: Just seen the censorship! I did, of course, mean as it what a goat does, or what you use to store water in the [email protected]

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Replying to DKB-Sheffield:
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By donnameneses
20th May 2022 16:31

Thank you, that's really helpful. Yes, I will ask the client to engage with them rather than me. And a good tip about filing the return anyway.

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Replying to donnameneses:
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By DKB-Sheffield
20th May 2022 16:31

Interestingly...

Someone like this...

https://www.accountingweb.co.uk/any-answers/serviced-accommodation-and-c...

Not a recommendation, but the post has just popped on Any Answers!

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Replying to donnameneses:
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By David Ex
20th May 2022 17:37

donnameneses wrote:

Thank you. How would I find a specialist? Just do a search for accountants who specialise in capital allowances? Or do they have a specific name? (sorry, sounds like a stupid question!).

Sorry, don't know. Just thought that the amounts were rather large and CAs can be a tricky subject.

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By Bobbo
20th May 2022 15:57

What is the membership structure of this tennis club? Are the mutual trading provisions of any relevance?

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Replying to Bobbo:
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By donnameneses
20th May 2022 16:07

Hi,
It's a 'for profit' company, owned by the two shareholder/directors. Mutual trading isn't relevant.

Thank you

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By plummy1
20th May 2022 16:32

We specialise in capital allowances analysis. I would suggest the majority of the expenditure is going to fall into SBAs. However the astra turf, access control gates and lighting could qualify for P&M in the right circumstances.

The fact that your client is loss making means that if you were going to employ a specialist to look at it you could wait for 12 months and then use the established figures to go back and amend the tax return . It will still be open for amendment and that way you your client's cash flow will not be compromised by paying the fees for a specialist's analysis.

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Replying to plummy1:
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By DKB-Sheffield
20th May 2022 16:36

Were your ears burning? See my post at 16:31!

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Replying to DKB-Sheffield:
By plummy1
20th May 2022 17:10

They were and thank you for the honourable mention

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