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The initials on the plates correspond with the name of the business and the signwriting on the vans. My client maintains that the smart personalised number plates on the vans are good for the image of the business and bring in work.
Are the plates plant for capital allowances purposes, or could they be written off as an advertising expense?
(Query T15,988) - Gordon.
The idea that monies spent on acquiring the personalised number plates have been for advertising purposes, so they are allowable business deductions, has been based on the fact that potential customers will remember the company's name more because of the number plates, than just the signwriting. This unfortunately is not the case.
Because the whole idea of selling off such number plates has become big business over the years, the Revenue has not ignored this and its manuals contain a number of paragraphs dealing with the whole subject.
When one buys a personalised number plate, what is one paying for? Paragraph 76923 of the Capital Gains Manual has the answer:
'The value of a personalised car number plate lies in the right to use a particular combination of numbers and letters. This right is an intangible asset which is separate from the actual plate, and from the vehicle to which it is attached. So a person who acquires a personalised car number plate may incur capital expenditure in acquiring:
* the plate itself (usually of negligible value);
* the car (where the plate is acquired with the car); and
* intangible rights of enduring benefit which allows him to use a specific combination of letters and numbers when registering a car.'
Registrations are looked at in paragraph 76928:
'A vehicle registration is made up of a combination of numbers and letters. The right to use a particular registration mark is not a chattel and is not part of the particular vehicle to which the plate showing the combination may be attached.
'A disposal of such a right does not, therefore, represent either:
* a disposal of a passenger car, or
* a disposal of another road vehicle, or
* a disposal of plant or machinery, or
* a disposal of a chattel, or
* a disposal of a wasting asset.
'Any gain arising on the disposal of a registration number will, therefore, be a chargeable gain.'
Paragraph 2396 of the Revenue's Capital Allowances Manual deals with car number plates:
'A car number plate is a chattel which is not machinery or plant in itself. It does not become machinery or plant until it is attached to a car which is itself machinery or plant.
'You may get a claim that expenditure on acquiring a personalised number plate qualifies for capital allowances as expenditure on the provision of machinery or plant. A personalised number plate gives intangible rights of enduring benefit - the right to use a certain combination of numbers and letters when registering the car. Those rights are not plant.'
So 'Gordon's' client can only claim capital allowances on the cost of the plates themselves which, when attached to the flagship vans, become qualifying accessories, and not on the more expensive, and no doubt longer lasting, intangible rights which, being of a capital nature, definitely do not qualify as deductible advertising expenses. - Goldstone.
The Inland Revenue's view seems to be that the number plate itself becomes machinery or plant when it is attached to the vehicle. However, the number plate itself only costs a few pounds and is to be distinguished from the number itself.
The Inland Revenue manuals make it clear that the cost of acquiring a personalised number does not qualify for capital allowances as expenditure on machinery or plant. The cost of buying a personalised number gives intangible rights of enduring benefit, the right to use that particular combination of numbers and letters when registering the car. Those rights are not plant, but the reference to enduring benefit means that the Inland Revenue considers that the cost is capital.
In cases where I have had discussions with the Inland Revenue, I have accepted this view because the client did not want to push the matter because of the amounts involved. What I have insisted on before accepting the treatment as capital is that the cost of transferring a number on changing a car is to be an allowable revenue expense. One local Inspector could not distinguish the differential and tried to argue that a transfer of the number was part of the cost of acquiring the second car. It took some time to persuade the Inspector that transferring the number to another car was simply transferring the enduring benefit that had already been acquired and was not part of the expenditure on the machine, the car. - Scotch.
Extracts from further replies received:
The only possible deduction that 'Gordon's' client could secure would be for a capital loss. This would arise if a cherished number was sold at a loss, for example if the name of the client changed so that new numbers were needed. Conversely if the numbers were sold at a profit, this would create a capital gain.
There is a possible way in which the client may be able to secure a tax deduction, by virtue of the new rules on the taxation of intellectual property, goodwill and other intangible assets; it is the latter which could include cherished numbers. The exact definition of what assets will and will not qualify has not been clarified and so this will have to be addressed with the Inland Revenue. Subject to that caveat, then if a number is purchased on or after 1 April 2002, and the cost is capitalised and then amortised over the useful economic life of the asset, the amortisation will be an allowable deduction for corporation tax. If the number is subsequently sold, the amount received will be taxable income. - Hodgy.
The outlay evidently represents advertising expense particularly appropriate to a removals business. For corporation tax the objective purpose of advertising suffices to meet the trade test in section 74(1)(a), Taxes Act 1988.
Does the outlay represent a revenue or capital expense? As accessories to the vans, the number plates appear to have at least a similar enduring character. It is arguable that a distinction is required between the right to use a particular registration combination and the metal plate on which it is engraved. The latter (although of little value) certainly ranks as plant within section 11(4)(a), Capital Allowances Act 2001. - M.C.N.
