A mezzanine floor is an intermediate floor that is typically open to the ceiling and floor below and does not extend over the whole floor space of a building. They are commonly installed to meet additional space demands and can be found in a wide variety of buildings including offices, retail stores and warehouses.
Even although construction may be similar the tax treatment once installed can vary significantly. The starting position for floors is that they are specifically excluded by statute in Capital Allowances Act (CAA) 2001 s21 so unless the area is in use for a qualifying R&D activity, the only way to claim capital allowances is if they perform some other function in CAA 2001 s23 – List C (e.g. storage equipment).
The leading case in favour of mezzanine storage floors remains Hunt v Henry Quick Ltd and King v Bridisco Ltd 65TC108. In that case, the two taxpayers (a footwear and electrical wholesaler) both erected mezzanine platforms to increase their respective storage space in their warehouses.
HM Inspector of Taxes took the view that the mezzanines were simply additional floors forming part of the warehouse premises whereas the taxpayers took the view that they were giant storage platforms more akin to racking or shelving.
Both of the mezzanines were substantial in construction and comprised a floor or platform made of chipboard resting on steel pillars, bolted to the ground and covering a substantial part of the ground floor area (almost two thirds in Hunt Quick Ltd).
In the case of Hunt Quick Ltd, the floor was also fixed to the wall with a steel plate for additional support and accessed by two stairs. In the view of HM Inspector of Taxes, although the structure was capable of being removed without prejudicing the structural integrity of the original building, it had not been removed in the 4 years since it was installed and appeared in all respects to function as a semi-permanent addition to the building. Lighting has also been fixed to the underside of the mezzanine floor.
What influenced treatment as plant was: –
Function: The mezzanines were used solely for storage purposes and played an active function in the course of the taxpayers’ trades. Access was generally limited to staff only.
Completeness: – The mezzanine’s retained a distinct and separate entity from the surrounding warehouse structures which were complete without them. They could also be removed easily without injury.
This contrasts with the leading case against raised or mezzanine floors as plant, Wimpy International Ltd v Warland (Inspector of Taxes); Associated Restaurants Ltd v Warland (Inspector of Taxes) – [1989] STC 273.
In the Wimpy case, both the raised and mezzanine floors were installed to give visual interest and to provide more seats. The mezzanine construction was of a steel frame suspended from the upper structure with a timber infill. Even although the floors would have to be removed at the termination of the lease, once installed they became part of the premises upon which the trade was carried on and played no other functional or distinguishable role.
This means that for a mezzanine floor to qualify for plant and machinery allowances it must meet the requirements of being a storage system as highlighted in the Henry Quick and Bridisco cases above. Mezzanine floors that are used for other business purposes or widely accessible to the public are unlikely to fall within this criteria.
HM Revenue & Customs (HMRC) are likely to ask for evidence to support such a claim (e.g. photographs, drawings, specification etc) and further details can be found in HMRC Manuals CA22070: – Plant and Machinery Allowances (PMA): buildings and structures: floors.