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Wetherspoon loses capital allowances appeal

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17th Feb 2012
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JD Wetherspoon (JDW) has lost its latest appeal to claim capital allowances for pub refurbishments in a slightly surreal tax tribunal which included detailed discussions about toilet cubicle partitions.

The pub group had already lost two appeals against decisions by HMRC in 1999 and 2003 to prevent it from claiming capital allowances for expenditure on the fitting out and refurbishing of some of its pubs.

The latest appeal - heard in the Upper Tribunal - JD Wetherspoon (JDW) v The Commissioners for Her Majesty’s Revenue and Customs (HMRC, FTC/05 & 83/2010, UKUT 42 - focused on whether items in the refurbishment of the Prince of Wales pub (parts of kitchens and toilets) could be included in a claim for allowances on plant or machinery.

The Capital Allowances Act 1990, which was in force at the time of the dispute between JDW and HMRC, did not provide a definitive definition of “plant” or machinery that qualifies for capital allowances. However, case law suggests that expenditure on the provision of machinery or plant does not include any expenditure on the “provision of a building”.

Building is defined as any asset which is “incorporated” or which is normally incorproated in the building – for example, walls, ceilings, and waste-disposal systems.

The upper tier tribunal ruled on three areas:

  • Is the wall panelling plant or is it part of the premises?
  • How far do the provisions in relation to incidental expenditure on an existing building extend?
  • The apportionment of preliminaries (an overhead-type cost for construction works)

The tribunal rejected JDW’s arguments and upheld earlier rulings favouring HMRC.

In the claim about incidental expenditures the tribunal concluded that the construction of a wall to form a kitchen so that the cooker could be used was not “incidental to the installation of the plant and machinery”.

Replies (6)

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By Andy3T
20th Feb 2012 11:32

Preliminaries & Partitions
The actual judgement is, inevitably more nuanced. The comments on the apportionment of preliminaries (a clear win for Wetherspoons) in para 98 is priceless. Para 87 on toilet partitions is something of a surprise given that HMRC had accepted the treatment by Wetherspoons and I expect them to challenge claims going forward given the comments.

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By Donald2000
26th Feb 2012 10:30

JD Wetherspoon

I dont see any great surprise in this, to be quite frank. Of course fixtures and fittings dont qualify for CA's under Plant and Machinery. Obviously JDW need to change their accountants, if this is the standard of fantasy that these people want to come out with.

They are probably along the same lines as the MPs expenses scandal - of course I can claim for a duckhouse, old boy. Quite delusional really.

 

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By plummy1
06th Mar 2012 16:11

I think you could be wrong?

Fixtures and fittings can & do fall under the heading of Plant and Machinery. Door handles and door closers are for instance classed as machinery as are door locks. The definition for plant is any item which is necessary to the business other than the premises and supports the trade (I could be paraphrasing). Wetherspoons do try and push the boundaries in terms of capital allowances claims and they are very good at extracting every ounce of value out of it. Probably another reason why they can sell beer so cheaply.

I agree about the duck house although if he ran a profitable nature reserve he might of been able to claim CAs unless it counted as the premises of course.

 

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Nichola Ross Martin
By Nichola Ross Martin
02nd Apr 2012 13:15

But, Wetherspoons did not lose on all the points

There was actually a cross appeal and the Tribunal DID find in favour re. preliminaries and some of the instalation costs.

Virtual Tax Support for accountants: www.rossmartin.co.uk

 

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By deanthebookkeeper
10th May 2013 15:36

Change of accountants needed?

This is not the first time JD wetherspoons have made errors this bad. When I worked as a manager for them years ago we were offered bonuses for finding potential sites but had to send our finding to a property firm Van De Berg

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By androo235
12th Jul 2013 15:05

It is an indictment of our insane TAX system

that it enables adults to earn their (often very good) livings with such socially and economically useless ponderings and deliberations as these.

Henry George - Progress and Poverty. I like Steve Keen's Debunking Economic's too.

And. Not only accountants. Wetherspoon's (and other) managers spend time speculating and worrying whether they will be able to capitalise (ie put on their balance sheet) some spend and then write it off against profits over some years, or, whether they should just knock it off profit and loss this year. This trivial issue generates such hot-air, but, that's our (and everyone;s else's ...) neo-classical economics driven tax system.

Mason Gaffney - The Corruption of Economics - I like that too.

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