Carr v Sayer is useful in demonstrating that assets which may initially appear to be buildings can still qualify as plant, depending on how they are used in the trade. It concerned caravans within a holiday park and whether they should be treated as plant or as part of the premises.
HMRC’s position was that the caravans were effectively buildings, providing accommodation and therefore forming part of the setting in which the trade was carried on. The taxpayer argued that the caravans were the means by which the business generated income and should therefore be treated as plant.
The Court agreed with the taxpayer. It found that the caravans were not simply providing space, but were the means through which the trade was carried on. They were the product being supplied to customers and therefore formed part of the apparatus of the business, rather than the premises.
This aligns with the established position reflected in HMRC guidance (CA22100), that plant must be apparatus used in carrying on the business, rather than the place in which it is conducted. The distinction is critical, as an asset may be used within a business and still not qualify, where it simply forms part of the setting.
The significance of this decision lies in the fact that physical characteristics are not determinative. The caravans may have resembled buildings in certain respects, but the Court focused on their role in the trade. The analysis therefore comes back to function, not form.
While this decision predates the introduction of the integral features regime in 2008, the underlying principle remains unchanged. The analysis still comes back to whether the asset is functioning as part of the trade, particularly in more marginal or grey areas.
That said, the position in practice is more nuanced. Traditional caravans, particularly where they form the core income-generating asset and are not equivalent in substance to permanent buildings, are more likely to fall within the definition of plant. More permanent structures, such as lodges or fixed accommodation units, are more likely to be treated as premises.
It is also important to distinguish the treatment of the units themselves from the wider infrastructure. Even where accommodation is treated as premises, elements such as electrical systems, water supply and drainage may still qualify as plant. The analysis therefore needs to be carried out at a detailed level.
In practical terms, the key is whether the asset is the means of generating income, or simply the environment in which that income is generated. That distinction remains central to capital allowances analysis today.
