First Tier Tribunal Decision – Capital Allowances Tax Case Regarding Camping Pods
The First Tier Tribunal (FTT) has published its decision on the case of Acorn Venture Limited v HMRC [2023] UKFTT 995 (TC).
It concluded that camping pods used by school children as part of school residential adventure holidays did qualify as plant and machinery allowances. In contrast, they deemed the larger pods used by teachers were not plant, interpreting them as fixed buildings, meaning capital allowances were denied by virtue of s21 CAA2001.
Overview
The taxpayer provided residential accommodation for school children on adventure holidays across a number of locations, predominantly in the UK.
In YE 2015, they purchased 26 fully constructed camping pods for their South Wales adventure centres that arrived on site on trailers. 20 were for use by the children (basic pods) and the remaining 6 were for adults (teacher pods). These replaced existing portacabins that were on site.
The tent living villages (camping pods) were completely flexible and could be readily moved as required on demand.
The camping pods were triangular in shape and had wooden frames. Each was supported by a platform that was attached to breeze blocks cemented to the existing hardstanding, with electrical connections and lighting, windows, doors and roofs but the walls were not solid. Timber beds were built into the pods. Catering facilities were provided centrally on site. Externally the basic pods and teacher pods were identical in appearance.
The only difference between the basic pods and the teacher pods were the following:
- Basic pods slept 5 people
- Teacher pods slept 2 people and had flushing toilets, washing facilities and a kitchen area for tea and coffee making
Both were moveable.
The taxpayer gave evidence that it was intended that the pods could be moved should the need arise and in 2019 they had received a quote to supply a lorry and crane to move 6 pods to another site. However it was established that between the initial purchase and the final sale of the site in 2021/22 the pods were not in fact moved from the position in which they were first sited.
First Tier Tribunal
The taxpayer had claimed both basic pods and teacher pods as qualifying as plant (as part of their Annual Investment Allowances). HMRC disputed this and reduced the capital allowances claim by £286,000 (£272k for camping pods and £14k for legal fees).
The taxpayer appealed HMRC’s decision and the case was taken to the FTT.
The FTT approached the basic pods and teacher pods separately and concluded the following:
- The basic pods were plant for the following reasons
- Whilst being a structure, they were not fixed and only sat on the hardstanding, being attached only for health and safety reasons.
- They only provided a form of shelter and therefore would be more akin to a tent rather than a building. Having no toilet facilities or small kitchen they did not provide living accommodation.
- The teacher pods did not qualify as plant for the following reasons
- The teacher pods were buildings fixed to the ground
- The teacher pods were attached to permanent foul drainage points and as such gave them a degree of permanence
- The provision of toilets and small kitchens meant that instead of just providing shelter, they also provided more facilities and a greater level of comfort.
- The FTT therefore deemed the teacher pods to be buildings and allowances were denied in accordance with s21 CAA2001.
- The FTT took the view that …’the relevant intention to move the pods must be demonstrated in the period of the claim’. As the teacher pods had not been moved in the year of the claim expenditure on the teacher pods was excluded under both s21 and s22 and was not saved by item 21 List C of s23 CAA2001
Lovell Consulting’s View
We consider that the tax payer seems to have argued their case poorly. Legal fees should not have been claimed and they could have demonstrated more clearly an intention to move them around the site, particularly as they were brought to the site and one was moved.
Tax legislation states moveable buildings may be claimed as plant as long as there is an intention to move these buildings in the course of the qualifying activity.
There is no relevant tax law on the point that restricts a claim on moveable buildings as plant and machinery allowances and as such the same logic could apply to builder portacabins which are ‘fixed’ to the ground due to underground drains and water connections. However, builder portacabins are still claimed as plant allowances as they are moved from site to site, despite their drainage and water connections.
We would recommend seeking specialist advice from capital allowances experts for any taxpayers who are embarking on such projects to ensure that all points are carefully and correctly considered and costs are segregated and claims fully disclosed in the tax return.
