MOT Inspection Pit

Kimozaki

Hello one and all

I'm hoping somebody can share their knowledge with me.

A vehicle repair/service garage that I produce the accounts for installed an MOT inspection pit into a property which is on a 10 year lease from the local council. The local council agreed to the installation taking place on the agreement that should the property be vacated during/at the end of the lease then the pit will need to be filled in and put back to it's original state.

I'm fine with the correct treatment of P&M which form the bulk of the costs of the installation project and am aware of capital allowances that can be claimed.

The rest of the associated costs are building materials for the project i.e. sand, cement, rebar, lintels etc. and it is these costs that I need advice on. I believe these would fall under the category of land and buildings.

My understanding is that the installation of the pit will have added value to the property so would I be correct in thinking that the cost of the building materials can be depreciated?

I plan to depreciate the costs over the term of the lease as this was renewed around the same time as the project began.

Any help or pointers to further guidance will be appreciated.

Thanks

Kim

CeeJaySix

My instinct is that it forms part of the fabric of the building and therefore yes you can capitalise and depreciate over the life of the lease assuming the cost exceeds recoverable amount (ie. the value of the lease is increased by adding the pit).

Cost should include estimated costs to return the property to it's original state as there is an obligation to do so, along with a corresponding provision.

A quick Google turned up this thread where there is an argument for classifying as plant and therefore capital allowances would be available...I'm not sure I buy it but it might be worth investigating: http://www.accountingweb.co.uk/anyanswers/inspection-pit

Kimozaki

Thanks for your reply CeeJaySix. I had a feeling I was on the right lines, just need to do a bit more research.

I did come across that thread for classifying it as plant but didn't really buy it either but I'll delve deeper into it.