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Capital Allowances |
17 |
Different definitions have been suggested for specific instances. In Yarmouth v France a claim was brought by a workman under the Employers’ Liability Act 1880 for damages for injuries sustained due to a defect in his employer’s plant, in that case a vicious horse. Lindley LJ stated:138 |
‘‘In its ordinary sense (plant) includes whatever apparatus is used by a business man for carrying on his business—not his stock-in-trade, which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business.’’ |
This test has been helpful but not exclusive139 in capital allowance cases. The test clearly covers fixtures and fittings of a durable nature. Therefore, railway locomotives and carriages140 and tramway rails141 have been held to be plant, as have knives and lasts used in the manufacture of shoes,142 but not the bed of a harbour,143 nor stallions for stud purposes.144 |
It is now clear that Plant and Machinery is not confined to things used physically,145 but extends also to the intellectual storehouse of the trade or profession, eg the purchase of law books by a barrister.146 However, rights to exploit plant are not plant—a matter of great concern in the area of intellectual property.147 It is not necessary that the object be active, although a passive object may be less obviously plant.148 |
It has been suggested, eg by the Revenue, that a thing which lacks physical manifestation cannot be plant. If this is true, it leads to a substantial and regrettable lack of clarity with regard to many items of intellectual property. The piecemeal provisions for copyright, know how and certain types of scientific research are no substitute for a modern and coherent law. Special legislation now applies to computer software (see below). |
24A.2.3.2 Computer Software |
Where capital expenditure is incurred on the outright acquisition of computer software the normal Plant and Machinery allowance is available.149 However, problems arise where a capital sum is paid for a licence to use the software, or for the provision of software by electronic means. In the first instance, it cannot be said that the software is owned by the taxpayer while, in the second, it may lack the degree of tangibility necessary for plant to exist.150 |
Today, software acquired under a licence is treated as owned by the person carrying on the qualifying activity (T) as long as T is entitled to the right, while computer software is treated as being plant or machinery.151 |