Capital allowances claims using sampling for fixtures: HMRC Brief

HMRC has published Revenue & Customs Brief (RCB) 24/12 'Capital allowances: sampling as a basis of claim – fixtures'

Retail outlet

New Guidance on Sampling

HMRC has invited comments on proposed new guidance, establishing limits on the use of sampling as a basis of a capital allowances claim in respect of qualifying expenditure on fixtures. 

This will be particularly relevant for companies; typically those in the retail or leisure sectors that have multiple premises and fit them out in a largely uniform manner or corporate style to 'create a standard type of shop/outlet'.

The Capital Allowances Manual guidance has previously accepted, in principle, that sampling may be used as a basis for a claim for plant and machinery allowances (PMAs).

However, the Brief explains that many businesses have submitted sampling proposals that were not 'statistically acceptable, largely because the sample size was too small'.

Consequently, there have been 'significant risks' of inaccurate Capital Allowances claims and firms paying 'incorrect amounts of tax', HMRC said. 

Acceptable accuracy

The new guidance aims to reduce uncertainty and reassure businesses and HMRC that the estimate of qualifying expenditure on fixtures derived from sampling is of 'acceptable accuracy'.

The proposed new guidance indicates that sampling should be considered where:

  • the overall size of the population (the total number of properties or units) allows for a reasonable sample size to be drawn from it (HMRC does not consider any sample size that is less than 15 to be reasonable);
  • there would be a ‘considerable and demonstrable burden’ involved in analysing the expenditure for the whole population; and
  • the nature of the works undertaken is reasonably similar across the whole population, or ‘appropriate stratified sampling’ is undertaken.

Specialist Advice

Undoubtedly if these proposals go through, it will mean that fewer businesses will be permitted to use a sample approach, unless 15 or more properties are analysed in detail and that this 'sample' is considered to be statistically valid.

The deadline for comments is 31 October 2012.  If you would like to discuss any aspects of these proposals from HMRC or the impact to your business of any changes to a sampling approach then please contact our team to see how E3 Consulting can enhance your tax savings through our specialist property tax advice.  To see how much you (or your clients) could save against any current, future or even historic property expenditures contact our team.


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