UK Tax Treatment of Studio Builds

[Rupert Limehouse]

To any UK-based professional studio owners - have any of you successfully argued with HMRC (the taxman) that the cost of construction of a 'room within a room' control room, live room etc should be treated as 'plant' (and therefore appropriate for capital allowances which are tax-deductable), as opposed to 'buildings improvement' (which attracts no tax deductions)?

Logically I feel it is a piece of plant which does the job of acoustically isolating the recording and monitoring space from outside interference, and providing a suitable acoustic to record and monitor in, as free as possible from standing waves etc. If you bought one or more sound isolation booths (however large) and placed them free-standing in a room to fulfil the same functions, there would be no argument about whether it was plant or not, but it becomes more grey as it's debatable as to whether a custom-built solution is removable or not, regardless of the job it is doing.

Aoplogies if this is in the wrong forum (mods please move if so), but it seemed the most likely place to get a response from professionals :-)

[andyspiller]

Hi Rupert

Are you attempting to get a 100% write-off expenditure (IMO unlikely) or are you looking to claim the capital expenditure route?

Best regards
Andy

[Rupert Limehouse]

Originally Posted by andyspiller

Hi Rupert

Are you attempting to get a 100% write-off expenditure (IMO unlikely) or are you looking to claim the capital expenditure route?

Best regards
Andy

I'm not expecting to be able to 'expense' it (write off 100% against tax in the year it's spent), just to treat it in the same way as other equipment and claim capital allowances - I forget the exact percentages but something like 50% in the first year and 20% of the reducing balance thereafter.

[Rupert Limehouse]

Bump!

Surely some of you must pay tax? :-)

[Demor]

I'm not sure how this would work in the UK but here in holland it really doesn't matter in the end because if you would sell the place in the future you would have written of your investment and you would have to pay a lot of taxes on your profit from your realestate sale.

[Rupert Limehouse]

Originally Posted by Demor

I'm not sure how this would work in the UK but here in holland it really doesn't matter in the end because if you would sell the place in the future you would have written of your investment and you would have to pay a lot of taxes on your profit from your realestate sale.

It's not the same here unfortunately...

[Vinylizor]

I'm in a similar position, and it would be great if it were allowable - however I can't see HMRC going for it!

At the end of the day it's a construction and part of the fabric of the building - no different to a swimming pool, or a fitted kitchen / wardrobes etc. You can't take it away with you when you go - well you can but only in a skip!

[Rupert Limehouse]

Originally Posted by Vinylizor

I'm in a similar position, and it would be great if it were allowable - however I can't see HMRC going for it!

At the end of the day it's a construction and part of the fabric of the building - no different to a swimming pool, or a fitted kitchen / wardrobes etc. You can't take it away with you when you go - well you can but only in a skip!

Hmmm - but a fitted kitchen is rather different if you're a professional chef, and a swimming pool is rather different if you're a leisure centre. Although the studio is part of my house, it's a live/work development with dual use planning permission, the studio is on a separate floor with its own entrance (and doesn't commute directly with the residential floors), and the entire construction is actually completely freestanding within the outer walls of the property...

[Matt Syson]

Hi
It sounds like you need to talk to a good accountant who understands your situation.
This may be quite hard to find however as it is rather specialised.
I wish you luck.
Matt S

[Rupert Limehouse]

Originally Posted by Matt Syson

Hi
It sounds like you need to talk to a good accountant who understands your situation.
This may be quite hard to find however as it is rather specialised.
I wish you luck.
Matt S

I have a good accountant who is also a musician and understands the arguments pretty well - what I was hoping to find was some examples of 'precedence' to help my case - anyone?

[Steve Honest]

HI chaps

I have the most pleasing way to deal with all of this tax, im willing to introduce you to the people involved.
Pm me if you really need a full tax solution.
steve

[binarymilton]

Originally Posted by Rupert Limehouse

To any UK-based professional studio owners - have any of you successfully argued with HMRC (the taxman) that the cost of construction of a 'room within a room' control room, live room etc should be treated as 'plant' (and therefore appropriate for capital allowances which are tax-deductable), as opposed to 'buildings improvement' (which attracts no tax deductions)?

Logically I feel it is a piece of plant which does the job of acoustically isolating the recording and monitoring space from outside interference, and providing a suitable acoustic to record and monitor in, as free as possible from standing waves etc. If you bought one or more sound isolation booths (however large) and placed them free-standing in a room to fulfil the same functions, there would be no argument about whether it was plant or not, but it becomes more grey as it's debatable as to whether a custom-built solution is removable or not, regardless of the job it is doing.

Aoplogies if this is in the wrong forum (mods please move if so), but it seemed the most likely place to get a response from professionals :-)

My expenses are fairly simple (related to performing and recording music from a semi-professional musician's point of view).

But this stuff invariably comes down to the exact, precise wording of what you're allowed. It shouldn't be a case of having to argue about it with the taxman.

Several times in this thread the question of whether 'you can take it with you' or whether it's integral to the building has cropped up. You need to examine the precise wording of how buildings improvement is described: what constitutes "improvement", for instance. (Your room within a room wouldn't be thought of as "improvement" by a property developer wanting to convert the building into flats, for example.)

I wonder if you might be able to do something like claim the cost of the materials for constructing it as capital expenses, but not the labour of doing so. (Or something like that.) For instance, if your room-within-a-room demands any special materials (acoustic panelling, say) suppied by a specialist studio-material manufacturer, could that perhaps be claimed?

How good is your accountant, basically? Mine is excellent, and knows everything there is to know about everything. He is an accountancy God. He'd tell me the answer immediately, and if he couldn't save me money on it he'd flick through his various books until he found some way of clawing back something, however small.

[Quayside Studios]

Last year I came across this exact problem. I'm terrible with taxes (my accountant sorts it all) but I do remember that we managed to get most (if not all) of the construction costs for the build of my two isolation booths written off as 'equipment' costs to be taken into account over many years. This included doors, windows, timber, plasterboard, rockwool etc. I think the main factors that came into account were that the build was specific to my business, non structural and not on any external walls.
Cheers, Julien

[Rupert Limehouse]

Thanks for all your comments - tax inspection soon - will let you know the outcome!

[Rupert Limehouse]

Happy to report that I've just received written confirmation from HMRC that following a visit to the studio and meeting with myself and my accountant last week, my claim for capital allowances on the build of the studio has been allowed in full. This included all materials and labour costs for the control room, live room, machine room, booth and amp chamber (we left out about 10% for kitchen/toilet/storage).

Key points were that the construction performs as plant specific to my business (sound isolation, acoustics) which I was able to illustrate by showing that there are commercially available products (like the Esmono rooms) which fulfil essentially the same function, and that the entire construction is freestanding within the outer walls of the premises.

A good bit of case law is referred to in CA21100, available on hmrc.gov.uk, "if and only if land, premises or structures in addition to their primary purpose perform the function of plant in that they are the means by which a trading operation is carried out.....the land, premises or structures are treated as plant".

Hope this helps some of you save some cash!

[narcoman]

Excellent news. Were you doing the work yourself or did you outsource the entire project? Would that not have an effect as capital expenditure (ie make it easier)?

[Rupert Limehouse]

Originally Posted by narcoman

Excellent news. Were you doing the work yourself or did you outsource the entire project? Would that not have an effect as capital expenditure (ie make it easier)?

I project managed it myself but used two regular builders for the large bulk of the labour - not sure I could have claimed for my own labour :-)

[Vinylizor]

Wow - excellent news! I'll be passing this information straight on to my accountant!