The last few years have seen a huge growth in 'glamping', a valuable more luxurious form of traditional camping, that is designed to entice greater numbers into the outdoors with more variety and increasingly novel forms of accommodation. It's fun and is undoubtably a valuable addition to the hospitality and tourism sector.
The recent tax case between Acorn Venture Limited and HMRC [2023] UKFTT 00995 (TC) concerns the capital allowances treatment of 26 new timber log camping pods (similar in style to the above) at an outdoor activity centre within the Brecon Beacons National Park which was dedicated to residential school trips.
The taxpayer (the site owners and operator) sought to claim plant and machinery allowances (and the 100% Annual Investment Allowance) on the new camping pods installed on hardstanding previously occupied by 10 portakabins that were no longer fit for purpose.
HMRC rejected the claim on the basis the pods were not single items of 'plant or machinery' but buildings or fixed structures ineligible to be treated as qualifying for plant and machinery allowances in their entirety. First-Tier Tribunal (FTT) allowed the taxpayers appeal in part, accepting that the 'Basic Pods' (20) were 'plant' but that the 'Teacher Pods' (6) were not.
Background to Camping Pod Installation
The taxpayers principal business, and its qualifying activity for capital allowance purposes, was that of a tour operator, providing residential adventure holidays for school children from centres at various locations, predominantly in the UK.
In the course of that business, the company purchased the camping pods and sited them at
their Royal Oak centre in the Breacon Beacons in South Wales.
All the pods had a similar external construction but were configured slightly differently inside. The 20 'Basic Pods' were open plan and had five timber beds whereas the 6 'Teacher Pods' had two beds with flushing toilets, washing facilities and a small “kitchen” area.
When viewed from the front they were approximately triangular and similar to an up turned boat with pvc lockable door, rear ventilation window, insulated flooring with ply deck over a stained wooden base frame; and, sat on breeze block cemented to the ground. Each pod was anchored to the ground but otherwise rested by their own weight.
All 26 pods had a 32amp electric hook-up which provided lighting (and power to the Teacher Pods) similar to the standard connection for a mobile or static caravan. Critically, the Teacher Pods had plumbing (waste and water) connections and it was this addition that was the determining factor in FTT's conclusions.
Technical Arguments
HMRC accepted that the expenditure on the Pods is capital in nature, incurred for the
purposes of the taxpayers qualifying activity and that the Pods are not the setting/premises
from which it operates its business. There were akin to the tents located elsewhere on the site and designed to provide a similar experience as part of the wider organised activities on the adventure site.
HMRC's argued that the pods once installed were each a building such that they were excluded by CAA 2001 s21 and that they were not demonstrably moveable so a to fall within the exemption contained in s23 - List C(21) - 'Moveable buildings intended to be moved in the course of the qualifying activity'. Further, even if the pods were not regarded as a building they should then be regarded as a 'structure' and excluded by s22.
The taxpayer contended the pods were not buildings to provide living accommodation (in line with their design and planning obligations) and even if they were, were moveable, as demonstrated by their installation (as single units by crane) which was necessary for flexibility of operation across other sites. They were structures, but not fixed structures, as "they rested by their own weight on the ground and were fully moveable albeit using the right equipment" and similar in substance to the wooden gazebos placed in a pub garden as a smoking shelter and allowed in Andrew v HMRC [2010] UKFTT 546 (TC).
it is worth noting that the taxpayer was not operating a licensed caravan site and could therefore, not benefit from the potentially more generous definition that gives caravans a wider meaning (i.e. double units delivered in two sections and then joined together and wooden lodges) provided these are moveable. Holiday camps like leisure parks, hotels and conference centres are normally outside this arrangement (CA22100).
Conclusion
FTT concluded that that all pods were structures and that the 'Basic Pods' were not 'fixed'; however, the 'Teacher Pods' due to their water and waste plumbing were.
In reaching their conclusions, FTT ruled that the 'Basic Pods' lacked the sufficient substance and function to be considered buildings. However, they also ruled that the 'Teacher Pods' had all the 'living accommodation providing sufficient security and shelter and they are fixed to the ground' to be treated buildings.
This meant the 'Basic Pods' were allowable as plant but the 'Teacher Pods' were not because they were not saved by List C(21) - 'Moveable buildings intended to be moved in the course of the qualifying activity'.
Reaching the conclusion between 'building' and 'structure' was not clear cut and there is some interesting discussions and debate within the case transcript for any specialists interested in this detail. On the intricacies of 'moveability', FTT could not discern that there was a substantive difference between moveability “in the course of” and “for the purposes of” a qualifying activity but it accepted their was no clear intention to move the pods when the initial claim was made in 2015.
The claim for the 20 'Basic Pods' was allowed (excluding legal fees) and the claim for 6 'Teacher Pods' was rejected. Both parties have a right to appeal or agree quantum (the Teacher Pods will contain qualifying plant elements like power, water, fitted furniture etc.).
Any questions on this, or a related tax matter, please contact me.