In a decision which brightens the often controversial dividing line between capital and revenue expenditure, the First Tier-Tribunal has upheld a caravan park owner’s claim for a tax deduction in respect of the cost of resurfacing with hard-core an area used by touring vehicles. The tribunal ruled that the £89,210 cost should be viewed as a deductible trading expense.
The three-acre area that was re-surfaced was a relatively small part of the entire 51-acre caravan park and the new surface, which resembled a car park, was much less aesthetically and environmentally pleasing than the grass which it replaced. It was not suitable as a recreational area of children and customers had complained of difficulty in securing pegs into such a hard surface.
Although the new surface was marginally more expensive to maintain than grass, it had been chosen in response to an opportunity to buy hard-core at a low price and to avoid serious business disruption for up to two years whilst grass re-grew. The tribunal ruled that, on the particular facts of the case, the re-surfaced area had not been ‘enhanced or improved’ by the works and the costs involved were therefore fully deductible as a revenue trading expense.