Nurseries have substantial imbedded plant and machinery (P&M) items and repairs. However the less obvious items often get overlooked by accountants, surveyors and tax advisors.

Why does this happen?

There are many obvious items of plant such as loose furniture and fittings which accountants can easily identify and segregate to allowances. However there are additional imbedded trade related items of P&M that are harder to identify. It requires a specialist to breakdown these costs and separate qualifying and non qualifying items.

Most new build nurseries use design and build contracts for construction. The by-product of choosing this procurement route is the lack of detailed cost information. Typically clients will only receive a high level summary sheet of costs with no further details such as description “Carpenter”. To maximise total allowances by breaking down and allocating values to P&M from high level figures, a specialist with both tax and surveying knowledge is ideally required.

For instance carpenter may include fixtures and fittings joinery items which are qualifying as well as non qualifying skirting. This distinction can predominantly only be identified by specialists who can correctly segregate costs.

For fit outs or refurbishments the nursery may engage with local builders and similar problem arises as the invoices are normally not nicely detailed.  As a result tax savings are overlooked.

Typical P&M within Commercial Properties

Some examples of qualifying P&M that are found in nurseries include carpets, furnishings, security alarms and hot and cold water installations.

Unusual P&M within Nurseries

There are further qualifying items of P&M that are predominantly found within nurseries. Significant additional allowances can be obtained. Examples include:

  • Trade drainage
  • Safety rails & gates that are usually not clearly distinguished in cost documents
  • Specialist equipment
  • Under floor heating
  • Special safety flooring materials
  • Safety equipment such as window restrictors
  • Builders work in connection with mechanical and electrical installations
  • Machinery to automatic entrance doors
  • Portacabins and temporary buildings that may be moved

Enhanced Capital Allowances (ECA)

The government has actively encouraged businesses to be more environmentally friendly. The introduction of ECA has provided business owners a greater incentive to promote their energy efficient credentials.

If items of P&M meet the Carbon Trust’s energy efficiency criteria, the full cost of these items can be written off in the first year providing 100% tax relief. The alternative would be (in most cases) tax relief at 8% per annum on a reducing balance basis.

For nurseries, where construction of modern new build facilities could cost in excess of £1 million, the cash flow benefit to install ECA compliant plant is quite significant.

For example newer nurseries could have qualifying LED lighting.

Other examples of P&M that can attract ECA include heating and cooling systems and electric hand dryers.


Where a nursery is refurbished, expenditure on redecoration and roof repairs is often not nicely segregated. A specialist can carefully segregate to exclude improvement expenditure. For a nursery refurbishment there could be 30% or more expenditure that qualify as repairs. It is important for repairs to consider the accounting treatment at an early stage.

Nursery Capital Allowances Benchmarks

As shown there is great scope to identify additional allowances in nurseries. It is reasonable to expect 20-40% of the purchase price of a nursery to be allocated to plant and machinery allowances (PMA), depending on the prior tax history. This will substantially increase if a refurbishment or fit out has been undertaken where 70-90% of total expenditure may qualify for PMA and repairs.

Case law

A capital allowances claim for 100% of a prefabricated gymnasium and laboratory facility was rejected in St John’s School v Ward.  A careful segregation of building costs is essential in most cases.

Recommended Approach

It is recommended to use a specialist capital allowances firm to extract all the available allowances. Lovell Consulting can identify the hidden gems as well the slightly more unusual items of qualifying plant.

We can also add significant value where information is missing or difficult to obtain. As a dual qualified team in tax and surveying, we are able to break down costs and value qualifying items. This means that it is not necessary to have perfect information.  Lovell Consulting advise many nurseries and independent schools on capital allowances.

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