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Taxable Benefits for Relocatable Partitioning

by Andy Bowater / July 09, 2014

Changes announced in the 2007 budget, effective from April that year, mean business owners should be even more receptive to relocatable partitioning when extending or building new premises.

A case in 1958, involving shipping agents in Hull, set the precedent for the tax treatment businesses enjoy today on relocatable partitioning. Having initially been denied any tax relief for its expenditure on partitioning, John Good and Sons had the decision overturned at the Court of Appeal. The original inspector's view was that the partitioning was part of the building and therefore did not attract any tax allowances. The shipping agents argued that they had instructed the architects to ensure that the interior of its new premises was flexible enough to allow for changing business requirements. Consequently the partitioning chosen employed hardboard sheeting inserted into metal ribs screwed to the floor and ceilings. As such, the partitioning was relatively easy to relocate.

It was concluded that partitions intended to be movable to meet the differing future needs of a business, were plant. Tax allowances were therefore due.

The court's conclusion remains the basis on which tax allowances can be claimed on partitioning today. Satisfying this test is crucial for eligibility for allowances now available on plant and machinery. If the partitions are not movable they are considered to be part of the building and no tax relief is available.

Having established that the expenditure is allowable, the annual investment allowance (AIA) with the Finance Act 2008 comes into play. The AIA provides 100% relief on the first £25,000 worth of qualifying expenditure after 6 April 2012 (1 April 2012 for companies) and thus increases the amount of relief immediately available to business owners. Any qualifying expenditure above £25,000 then attracts a 18% writing down allowance (WDA). It should be noted that the annual investment allowance is 100% of the first £25,000 expenditure on all plant in a given accounting period and that a group of companies will only receive one allowance of £25,000 across the group. All the same, it is an allowance worth having. This relief offers significant savings over 6 years. The availability of the 100% annual allowance and 18% writing down allowance means that on an example spend of £100,000, 72% of the expenditure will have had attracted tax relief after the first six years. The writing down allowance will continue in future years on the ever decreasing annual balances.

The message to clients is clear: wherever possible think movable to ensure that partitions qualify for tax allowances.

The tax status of the demountable and relocatable Triplan systems offers enhanced tax writing down allowance incentives over traditional building materials of blockwork or drylining.

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