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‘Cash in Pension’ Category

  1. Plant and Machinery Allowances and Fixtures

    August 23, 2011 by admin

    Plant and Machinery Allowances (PMA) can typically be claimed only by the owner of the asset. However, in hire purchase contracts, the hirer can claim PMA on the hired asset even though legally that person is not yet the owner. The legal owner, the person who buys the asset and hires it out, cannot claim PMA.

    The case with fixtures is also similar. Fixtures are attachments to buildings or land that are considered permanent and provide a lasting improvement to the building or land. If the building or land is leased out to a lessee and the latter incurs expenditure on adding such a fixture, that person is not legally the owner of the fixture.

    However, in such a case, fixtures legislation allows the lessee to claim PMA on the fixture. Even if the expenditure on the fixtures is incurred by the lessor, that person might make a joint election with the lessee under CAA01/S183 (1)(e) whereby the lessee becomes entitled to claim PMA on the fixture. Fixtures legislation treats the lessee as the owner of the fixtures in such a case and disallows the lessor from claiming PMA on the same fixtures.

    A fixture is different from chattel. Chattels are also tangible just like fixtures. However, they are moveable and have not been affixed to the building or land. Even chattels can become fixtures once they are fixed to the immoveable property on a permanent basis to improve the property. For example, a central heating system that has not become part of the building is considered a chattel (it can still be moved to another building and fixed there, for example).

    Even though tenant’s fixtures, i.e. fixtures affixed by the tenant to the immoveable property is distinct from landlord’s fixtures in that the tenant can remove these fixtures when that person leaves, the distinction between tenant’s and landlord’s fixtures is not relevant in the context of fixtures legislation.

    For more information please visit Pension Payments or drop by the blog owners site Cash in Pension to get intouch

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  2. Owner of Fixtures: Elections between Lessor and Lessee

    August 23, 2011 by admin

    A lease can be of a building or land which is received by the lessee along with several permanent fixtures forming part of the asset. Alternatively, the lease can be an equipment lease for plant and machinery purchased by a lessor and leased out to a lessee. The plant and machinery then becomes a fixture to a building or land used for carrying on a qualifying activity.

    In the case of equipment lease mentioned above, the lessor and lessee can jointly elect to treat the lessor as the owner of the fixture provided certain conditions are met. These conditions are:

    • The lessee is carrying on a qualifying activity and the leased equipment is used in this activity
    • The lessee would have been entitled to claim PMA if that person had incurred the expenditure for providing the equipment
    • The plant and machinery becomes a fixture by being fixed to land that is neither a building nor part of a building
    • The lessee has an interest (including lease) in the land
    • The lessor is entitled to sever the fixture at the end of the lease period and the severed fixture can then be used at another premises for the same purpose
    • Under the lease agreement, the lessor will own the equipment on its being so severed
    • The lease is one that comes under the category of an “operating” lease (as distinct from a “financing” lease) and
    • The plant and machinery is not intended for use in a dwelling house

    A similar election can be made where:

    • An energy services provider provides plant and machinery that becomes a fixture in a relevant land
    • The client of the provider has an interest in the relevant land and the provider doesn’t have such interest
    • The provider or a person connected with the provider operates the plant and machinery for the client and
    • The plant and machinery is not provided for leasing or for use in a dwelling house

    If elections are made as above, the lessee (or client in the case of energy services) will not be treated as the owner of the fixture under section 176 of the Capital Allowances Act 2001 for claiming PMA.

    For more information please visit Pension Payments or drop by the blog owners site Cash in Pension to get intouch

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