Nichola - my apologies about that, yes I was referring to a different section. However I do though think s25 and the findings in the recent Wetherspoons case is more relevant here than List C item 22.
Portia - I certainly am suggesting the lady at HMRC has got it wrong!
Nichola I am not sure of the relevance of the old s273, as this was part of the IBA rules (Part 3) that have now been removed. I also don't think any of these works in anyone's wildest imagination would have fallen within the definition of "preparing, cutting, tunnelling or levelling land for the purposes of preparing the land as a site for the installation of plant or machinery". Sorry.
Lastly, not sure of the relevance of whether the property was being used for letting since the property is not a dwelling
In case you still doubt me If you still doubt me can I suggest you also look at http://www.hmrc.gov.uk/capital-allowances/buildings.htm#2 and specifically the sections on "Fixtures in buildings" and "Integral features of buildings".
25 years experience I am sorry to contradict you but this is an area where I have specialised for over 25 years (unlike many of the newer so called capital allowances experts) and I can assure you allowances are available on any fixtures that form part of these improvement works (unless there are some details you have omitted to include - for example is the expenditure being subsidised or reimbursed fully by the landlord).
I would suggest you ask the "lady" on the help desk the specific question about fixtures forming part of the works - as opposed to the building or structure as defined in CAA2001 s21 & s23 - and which as s23 sets out will still qualify.
Whilst the cost of creating the fabric/structure of the kitchen and toilets will not qualify for capital allowances (unless your client is undertaking R&D activities in which case R&D Allowances could be relevant) the fixtures that form part of the works (the actual sanitary fittings and kitchen fittings) will qualify for capital allowances (normal WDA's or AIA if relevant) together with any incidental costs allowable under CAA2001 s25 as the facilities are being installed within an existing building.
With regards the issue of s25 you do need to look at the Wetherspoons' case which I think will also be very helpful and relevant to your Client's circumstances.
The fact your Client is just a tenant is not a problem as incurring the expenditure under the lease provides means the fixtures are treated as belonging to your client and so enabling them to make a claim.
Treated as belonging I accept the point about ownership - although I would have thought the householder had given his business permission to put the office in the garden. As such that interest in land granted to the company/business would normally allow any qualifying fixtures in the office to treated as belonging to the company/business.
Utility conduits My reasoning is I suspect what the pipes and conduits are carrying are cables and pipework from your client's household supplies which now extend the services to his garden office rather than new services installed by utility providers.
Additionally you need to consider CAA2001 s21 list A item 2 which states that assets treated as buildings include mains services and systems for water, electricity and gas. However certain electrical, heating and plumbing installations are allowed by virtue of s23 list C - this though does not extend to the provision of mains services.
Whilst I think the Tolley's book you refer to is a well written and useful guide it should not be a substitute for the legislation.
Rather excessive I think the current claim level is rather excessive - in my humble experience of specialising in CA claims on property for over 25 year!
Ultimately the garden office will be treated no differently to any other building or structure.
Next, in order to claim Plant and Machinery allowances the expenditure must not only be on items of plant and machinery acquired wholly or partly for the purposes of a qualifying activity (with any disallowance for "partly" depending on the status of the claimant).
Assuming, for simplicity purposes, the garden office was provided solely for your client's business then we can assume there is no need to make any disallowance.
Importantly allowances are given on the provision cost of the plant and machinery and so any fitting costs of qualifying items can be included within the claim cost for that item.
Moving on to the list you have provided then the pump will qualify as this is a piece of machinery.
The sanitary fittings (including wastes and any hot and cold water services) would qualify as would the kitchen fittings and appliances (whether he needs the kitchen is his decision).
Like others I don't think the triple glazing or sound insulation would qualify. Why is this a requirement of his trade. In your client's case this is just part of the building. It could potentially qualify if he was using the office as a recording studio but not sure why it is required for computer services.
Finally with regards the ducts, pipelines etc. then anything that provides mains services to the property (including underground ductwork) will not qualify - these are a requirement of any building. Similarly the external drainage will not qualify.
Internally the electrical, heating and plumbing installations will qualify as would any external lights and any CCTV if any has been provided.
Next, you need to be aware that the qualifying expenditure needs splitting between the appropriate pools into which it falls (main pool or special rate) - although looking at the level of qualifying expenditure you're talking about then most of it should be covered by your clients AIA.
Any improvement? I think the distinction you need to make on the 3 properties is has your client improved them from the state when he acquired them - that would still allow the replacement of any parts of the properties (such as lights, sanitary fittings, heating, decorations and finishes) with modern day equivalent to still qualify as a repair, for example changing an old gas boiler with a modern new efficient boiler or replacing single glazed windows with double glazed.
What would not qualify as repairs, however, is if your client altered the properties in any way (such as the internal layout) or significantly improved the standard of accommodation - for example changing vinyl floors to stone. In this case the works would be capital in nature and then relief would only be available through the Capital Allowances regime - which unfortunately doesn't cover residential properties let as part of a property business
With regards the mortgage interest then the deductibility is not property specific but rather a cost of his entire existing qualifying activity as an ordinary property business. As such the interest payments can be to offset against the total income of his business
Any improvement? I think the distinction you need to make on the 3 properties is has your client improved them from the state when he acquired them - that would still allow the replacement of any parts of the properties (such as lights, sanitary fittings, heating, decorations and finishes) with modern day equivalent to still qualify as a repair, for example changing an old gas boiler with a modern new efficient boiler or replacing single glazed windows with double glazed.
What would not qualify as repairs, however, is if your client altered the properties in any way (such as the internal layout) or significantly improved the standard of accommodation - for example changing vinyl floors to stone. In this case the works would be capital in nature and then relief would only be available through the Capital Allowances regime - which unfortunately doesn't cover residential properties let as part of a property business
With regards the mortgage interest then the deductibility is not property specific but rather a cost of his entire existing qualifying activity as an ordinary property business. As such the interest payments can be to offset against the total income of his business
My answers
My apologies
Nichola - my apologies about that, yes I was referring to a different section. However I do though think s25 and the findings in the recent Wetherspoons case is more relevant here than List C item 22.
Yes and very worrying
Portia - I certainly am suggesting the lady at HMRC has got it wrong!
Nichola I am not sure of the relevance of the old s273, as this was part of the IBA rules (Part 3) that have now been removed. I also don't think any of these works in anyone's wildest imagination would have fallen within the definition of "preparing, cutting, tunnelling or levelling land for the purposes of preparing the land as a site for the installation of plant or machinery". Sorry.
Lastly, not sure of the relevance of whether the property was being used for letting since the property is not a dwelling
In case you still doubt me
If you still doubt me can I suggest you also look at http://www.hmrc.gov.uk/capital-allowances/buildings.htm#2 and specifically the sections on "Fixtures in buildings" and "Integral features of buildings".
Hope that helps
25 years experience
I am sorry to contradict you but this is an area where I have specialised for over 25 years (unlike many of the newer so called capital allowances experts) and I can assure you allowances are available on any fixtures that form part of these improvement works (unless there are some details you have omitted to include - for example is the expenditure being subsidised or reimbursed fully by the landlord).
I would suggest you ask the "lady" on the help desk the specific question about fixtures forming part of the works - as opposed to the building or structure as defined in CAA2001 s21 & s23 - and which as s23 sets out will still qualify.
Need to split out qualifying fixtures
Karen
Whilst the cost of creating the fabric/structure of the kitchen and toilets will not qualify for capital allowances (unless your client is undertaking R&D activities in which case R&D Allowances could be relevant) the fixtures that form part of the works (the actual sanitary fittings and kitchen fittings) will qualify for capital allowances (normal WDA's or AIA if relevant) together with any incidental costs allowable under CAA2001 s25 as the facilities are being installed within an existing building.
With regards the issue of s25 you do need to look at the Wetherspoons' case which I think will also be very helpful and relevant to your Client's circumstances.
The fact your Client is just a tenant is not a problem as incurring the expenditure under the lease provides means the fixtures are treated as belonging to your client and so enabling them to make a claim.
Hope that helps
Treated as belonging
I accept the point about ownership - although I would have thought the householder had given his business permission to put the office in the garden. As such that interest in land granted to the company/business would normally allow any qualifying fixtures in the office to treated as belonging to the company/business.
Utility conduits
My reasoning is I suspect what the pipes and conduits are carrying are cables and pipework from your client's household supplies which now extend the services to his garden office rather than new services installed by utility providers.
Additionally you need to consider CAA2001 s21 list A item 2 which states that assets treated as buildings include mains services and systems for water, electricity and gas. However certain electrical, heating and plumbing installations are allowed by virtue of s23 list C - this though does not extend to the provision of mains services.
Whilst I think the Tolley's book you refer to is a well written and useful guide it should not be a substitute for the legislation.
Does that help?
Rather excessive
I think the current claim level is rather excessive - in my humble experience of specialising in CA claims on property for over 25 year!
Ultimately the garden office will be treated no differently to any other building or structure.
Next, in order to claim Plant and Machinery allowances the expenditure must not only be on items of plant and machinery acquired wholly or partly for the purposes of a qualifying activity (with any disallowance for "partly" depending on the status of the claimant).
Assuming, for simplicity purposes, the garden office was provided solely for your client's business then we can assume there is no need to make any disallowance.
Importantly allowances are given on the provision cost of the plant and machinery and so any fitting costs of qualifying items can be included within the claim cost for that item.
Moving on to the list you have provided then the pump will qualify as this is a piece of machinery.
The sanitary fittings (including wastes and any hot and cold water services) would qualify as would the kitchen fittings and appliances (whether he needs the kitchen is his decision).
Like others I don't think the triple glazing or sound insulation would qualify. Why is this a requirement of his trade. In your client's case this is just part of the building. It could potentially qualify if he was using the office as a recording studio but not sure why it is required for computer services.
Finally with regards the ducts, pipelines etc. then anything that provides mains services to the property (including underground ductwork) will not qualify - these are a requirement of any building. Similarly the external drainage will not qualify.
Internally the electrical, heating and plumbing installations will qualify as would any external lights and any CCTV if any has been provided.
Next, you need to be aware that the qualifying expenditure needs splitting between the appropriate pools into which it falls (main pool or special rate) - although looking at the level of qualifying expenditure you're talking about then most of it should be covered by your clients AIA.
Hope that helps.
Any improvement?
I think the distinction you need to make on the 3 properties is has your client improved them from the state when he acquired them - that would still allow the replacement of any parts of the properties (such as lights, sanitary fittings, heating, decorations and finishes) with modern day equivalent to still qualify as a repair, for example changing an old gas boiler with a modern new efficient boiler or replacing single glazed windows with double glazed.
What would not qualify as repairs, however, is if your client altered the properties in any way (such as the internal layout) or significantly improved the standard of accommodation - for example changing vinyl floors to stone. In this case the works would be capital in nature and then relief would only be available through the Capital Allowances regime - which unfortunately doesn't cover residential properties let as part of a property business
With regards the mortgage interest then the deductibility is not property specific but rather a cost of his entire existing qualifying activity as an ordinary property business. As such the interest payments can be to offset against the total income of his business
Hope that helps
Any improvement?
I think the distinction you need to make on the 3 properties is has your client improved them from the state when he acquired them - that would still allow the replacement of any parts of the properties (such as lights, sanitary fittings, heating, decorations and finishes) with modern day equivalent to still qualify as a repair, for example changing an old gas boiler with a modern new efficient boiler or replacing single glazed windows with double glazed.
What would not qualify as repairs, however, is if your client altered the properties in any way (such as the internal layout) or significantly improved the standard of accommodation - for example changing vinyl floors to stone. In this case the works would be capital in nature and then relief would only be available through the Capital Allowances regime - which unfortunately doesn't cover residential properties let as part of a property business
With regards the mortgage interest then the deductibility is not property specific but rather a cost of his entire existing qualifying activity as an ordinary property business. As such the interest payments can be to offset against the total income of his business
Hope that helps