Capital allowances for caravans _ Paul Telfer

Tue 18 Oct 2016

In Paul Telfer [2016], the FTT held that capital allowances were not available to an employee who provided a caravan, as required by his employer, so that he could carry out his duties as an assistant warden of caravan sites.

The FTT applied the functional test in Benson v The Yard Arm Club Ltd and held that the caravan was not plant but rather the setting.

The FTT also undertook a detailed examination of the contractual arrangements regarding the employment and accepted that the caravans were necessarily provided for use in the performance of the duties of the employment.  However, the FTT stated ‘we are driven to the conclusion that the caravans were not something by means of which those duties were in part carried on, but were instead structures which played no part in the carrying on of those duties, but were merely the place within which they were carried on.  Thus, with some regret, we have concluded that the caravans do not pass the functional test and cannot therefore be regarded as plant for relevant purposes.’

Further, the FTT held that the caravan was not excluded by virtue of ss 21 or 22 CAA 2001 as these sections exclude defined assets from the meaning of plant or machinery, as this was also raised by HMRC, as another argument against the caravans attracting capital allowances.  However, the FTT found that they had no application in this case as the caravans were not ‘buildings’, even within the extended meaning of ‘buildings’ in section 21, nor were they assets treated as buildings within List A in section 21. Further, the FTT held that they were not fixed structures and therefore not ‘structures’ within the meaning of section 22.