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Wetherspoon loses capital allowances appeal

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JD Wetherspoon (JDW) has lost its latest appeal to claim capital allowances for pub refurbishments in a slightly surreal tax tribunal which included detailed discussions about toilet cubicle partitions.

The pub group had already lost two appeals against decisions by HMRC in 1999 and 2003 to prevent it from claiming capital allowances for expenditure on the fitting out and refurbishing of some of its pubs.

The latest appeal – heard in the Upper Tribunal – JD Wetherspoon (JDW) v The Commissioners for Her Majesty’s Revenue and Customs (HMRC, FTC/05 & 83/2010, UKUT 42 – focused on whether items in the refurbishment of the Prince of Wales pub (parts of kitchens and toilets) could be included in a claim for allowances on plant or machinery.

The Capital Allowances Act 1990, which was in force at the time of the dispute between JDW and HMRC, did not provide a definitive definition of “plant” or machinery that qualifies for capital allowances. However, case law suggests that expenditure on the provision of machinery or plant does not include any expenditure on the “provision of a building”.

Building is defined as any asset which is “incorporated” or which is normally incorproated in the building – for example, walls, ceilings, and waste-disposal systems.

The upper tier tribunal ruled on three areas:

Is the wall panelling plant or is it part of the premises?
How far do the provisions in relation to incidental expenditure on an existing building extend?
The apportionment of preliminaries (an overhead-type cost for construction works)
The tribunal rejected JDW’s arguments and upheld earlier rulings favouring HMRC.

In the claim about incidental expenditures the tribunal concluded that the construction of a wall to form a kitchen so that the cooker could be used was not “incidental to the installation of the plant and machinery”.

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Author: retailaccounting

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