The cost of providing a shelter for employees who smoke can be high – but can you claim a tax deduction for this?

It all depends on whether this structure is a building or a piece of fixed equipment. Accountants sometimes struggle with this!

If it Vincents structurehas four walls and a roof then it’s a building. But if it’s a smoking shelter then the question becomes more difficult to answer.

Fixed equipment (or plant) can be deducted from a company’s profits under the HMRC capital allowance system, but buildings cannot. Instead, businesses have to take the cost into account when selling the company and work out the profits on which to pay tax.

Be aware of the pitfalls. The main disadvantages to treating a structure as a building rather than plant are:

  • Longer delays for tax relief;
  • If a building is sold for less than it was purchased, it is not possible to obtain tax relief on the difference;
  • If the structure is demolished there will be no chance of obtaining any tax relief.

So, it’s always best to categorise a structure as plant to ensure the maximum tax relief.

A factory cannot be claimed as plant but structures such as bicycle sheds and smoking shelters are a very grey area. HMRC would like them to be counted as buildings but in 2010 the courts decided otherwise. The main reasons for this were:

  • The structure was clearly not part of the main business area;
  • It was attached by its own weight alone;
  • It could be moved;
  • It was a relatively open structure.

It’s probably best to treat the structure as plant and ensure there are records of the research carried out and the reasons behind the decision. At the worst, HMRC could claw back any underpaid tax.