Distinction Between Buildings and Structures Key in Acorn Venture Ltd v HMRC Case on Capital Allowances

Citation: [2023] UKFTT 995 (TC)
Judgment on

Introduction

In the case of Acorn Venture Ltd v The Commissioners for HMRC [2023] UKFTT 00995 (TC), the First-tier Tribunal (Tax Chamber) addresses the intricacies of capital allowances in relation to movable structures vis-à-vis fixed structures. The case is pivotal in elucidating the distinction between “buildings” and “structures” as per sections 21 and 22 of the Capital Allowances Act 2001 (CAA), and the qualifications for Annual Investment Allowances (AIA).

Key Facts

Acorn Venture Ltd, a company providing adventure holidays, claimed AIA for 26 camping pods, which constituted two types: Basic Pods and Teacher Pods. HM Revenue and Customs (HMRC) contested the claim, leading to the crux of the case - whether the pods constituted “buildings” or “fixed structures” ineligible for tax allowances under the CAA. Both sides accepted that the expenditure was for the company’s qualifying activity and the pods were not the setting from which the business operated.

The Basic Pods offered rudimentary sleeping arrangements comparable to tents, while the Teacher Pods, equipped with additional utilities such as flushing toilets and wash facilities, presented an enhanced level of accommodation.

The Tribunal applied several legal principles:

  1. Capital Allowances Act 2001 (CAA): Sections 21 to 23 distinguish between “plant and machinery” as qualifying for allowances and “buildings” and “structures” as exclusions, with certain “moveable buildings” that are intended to be moved for qualifying activities being exceptions.

  2. Premises/Setting Distinction: Relied upon the concession that the pods were not the setting from which business was conducted but potentially plant with premise-like characteristics.

  3. ”Building” and “Fixed Structure” Determination: Assessed physical characteristics and functionality of the Pods, their movability, and the intentions to move them, through the lens of case law including Anchor International Ltd and Andrew v HMRC.

  4. Intentionality for Item 21 List C Section 23 CAA: Examined the evidence of an intention to move the Pods in the course of the qualifying activity within the accounting period wherein the claim was made.

Outcomes

The Tribunal concluded:

  1. The Basic Pods were not considered “buildings” or “fixed structures” due to their lack of traditional walls, roofs, and the shelter level offered. Additionally, the Basic Pods were intended to provide an experience akin to tented accommodation, lessening their building-like substance.

  2. The Teacher Pods were determined to be “buildings” due to their enhanced features, including facilities that resembled those of living accommodation. They were fixed structures since they were anchored to a permanent water drainage system.

  3. The Basic Pods qualified for AIAs as plant and machinery not excluded by Section 21 or 22 CAA. Conversely, the Teacher Pods did not meet the criteria of Item 21 List C since the intent to move them during the qualifying activity could not be proven for the relevant accounting period.

Conclusion

Acorn Venture Ltd v The Commissioners for HMRC is a landmark case that underscores the fine line between apparatus serving as plant eligible for capital allowances and premises-like structures that are not. The Tribunal’s comprehensive analysis, supported by statutory interpretation and precedent, results in a partial victory for Acorn Venture Ltd, exemplifying the importance of demonstrating the intent to move “moveable buildings” within the claim period for allowances. Additionally, the judgment creates a precedent for other businesses with similar assets to consider regarding their capital allowance claims.