We have a client who has acquired a plant for circa. £20m that cannot be used in its current form for its intended purpose. The client is developing the plant spending many more millions on this so that it is capable of operating as intended. Directly attributable costs are capitalised without an issue.
However there are number of indirect costs that are being paid annually and I shall appreciate an opinion of what other members think on its treatment. As an example: annual rent of £1.2m is paid for the site on which plant is located as well as £200k per annum is paid to security personnel for the site etc. There are many other costs that are being incurred on an annual basis. Shall we capitalise these or they need to be taken to P&L thus creating a taxable loss?
I am aware in most cases rent payable is an overhead and not a directly attributable cost that can be capitalised. However isn't this scenario an exceptional case since the plant is under construction and it would be impossible to use the plant for its intended purpose until it is complete which is still expected to take few years.
If these costs are taken to P&L then I assume these will be relievable against future profits generated once the plant becomes operational. Are there capital allowances available if these costs qualifies to be capitalised?
PS: I am posting this as anonymous user due to the significance of numbers involved and I hope AW members will not feel offended by this.