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Capital Allowances |
37 |
expenditure on the construction of an industrial building or structure which is to be occupied for the purposes of a trade.346 If the building is to be occupied by a qualifying lessee or licensee it is the occupier’s trade that is relevant.347 |
The conditions for the (much more important) writing down allowance require that the person is entitled to an interest in the building or structure, that interest is a ‘relevant’ interest and that the building is an industrial building at the end of the relevant period.348 |
Allowances are confined to the expenses of construction; the cost of the land is excluded.349 The costs of certain preliminary works, such as cutting, levelling and tunnelling, may be claimed only if the works are carried out in order to prepare the land for the installation of plant or machinery.350 The costs of repairs are allowed as if they were construction costs unless they are deductible as revenue expenses. So, if a building is improved or altered, the costs of that work are treated as a separate subject for allowances.351 |
24A.3.2 Definition of Industrial Building |
The allowance may only be claimed if the building is an industrial building or structure, which is elaborately defined in CAA 2001, section 274, Tables A and B. This area has been much litigated. It is fair to say that the courts, taking their lead from some narrow legislation, have taken a consistently restrictive view of what can come within this category. The general effect of the definition is to confine allowances to productive, as opposed to distributive, industries. It is not necessary that the building be constructed in this country, and foreign plantations are expressly mentioned and defined (Table A paragraph 5); however, the profits or gains of the foreign trade must be assessable to UK tax under schedule D, case I rather than case V.352 |
24A.3.2.1 Qualifying Trades |
CAA 2001 rewrites the definition on those qualifying trades which allow a building to be an industrial building. The new list consists of Table A which set out those trades which qualify anyway and Table B which lists other undertakings—electricity, water, hydraulic power, sewerage, transport, highways, tunnels, bridges, inland navigation and docks—which only qualify if carried on by way of trade. |
| Table A’s first qualifying trade is one consisting of manufacturing goods or materials. The second is processing—a trade consisting of subjecting goods or materials to a process, a phrase which is to include maintaining or repairing goods or materials.353 |
| The older language used in CAA 1990, section 18(1)(e) put these two together and referred to buildings used for the manufacturing or processing of materials or subjecting goods or material to any process ‘Goods’ was held to mean and so probably still means merchandise, rather than |