Disability Discrimination Act - new access requirements - tax guidance

Contents

Introduction

From 1 October 2004, the DDA requires service providers to make “reasonable adjustments” to their premises to tackle any physical features that prevent disabled people from using their services.

What is “reasonable” will vary in different situations. It may depend on the type of service being provided and the size and resources of the service provider. It could be as simple as using contrasting colours to help visually impaired people distinguish walls from doors, lowering a counter to make it more accessible to a wheelchair user or providing better lighting and clearer signs. If you would like more information about the new duties you can visit the Disability Rights Commission’s website at www.drc.org.uk/open4all or you can contact the DRC Helpline by voice, text, fax, post or email. You can speak to an operator at any time between 08:00 and 20:00, Monday to Friday:

Telephone 08457 622 633
Textphone 08457 622 644
Fax 08457 778 878
Email enquiry@drc-gb.org

If you would like more information on disability issues, please visit www.disability.gov.uk

Part 1 Overview of the tax relief already available

Many of the adjustments potentially needed in relation to new duties under the DDA will already qualify for tax relief, either as a revenue expense, or through capital allowances.

Revenue expense

Examples of revenue expense could include the cost of large print documents, staff time and training on disability issues. These would all qualify as a revenue expense, and so would be wholly deductible for tax purposes.

Capital expenditure

Plant and machinery allowances (PMAs)

Some of the most expensive physical adjustments, such as the cost of hoists, lifts or evac chairs, currently qualify for “plant and machinery” capital allowances (PMAs). Similarly, toilets and basins, including those specially designed for use by disabled people, already qualify for PMAs.

Where a small or medium-sized enterprise is eligible for capital allowances on P&M, they may be claimed on 40% of the up-front cost of the items in the year when the expenditure is incurred (a first-year allowance). In the case of small businesses, this rate of first-year allowance has been temporarily increased from 40% to 50% for one year until April 2005. The annual rate of allowance in subsequent years, or for all years in the case of larger businesses, is 25%, on the reducing balance of unrelieved expenditure.

What constitutes a “small enterprise” or “medium enterprise“ for capital allowances purposes is explained in Meaning of SME.

Alterations to the fabric of buildings

However, expenditure on alterations to the fabric of a building (for example, to install a permanent access ramp or to enlarge a doorway to facilitate wheelchair access) does not normally qualify for any capital allowances, unless the building is an industrial or agricultural building or qualifying hotel, in which case the expenditure may qualify under the industrial building allowance (IBA) code or the agricultural building allowance (ABA) code.

IBAs or ABAs

The rate of capital allowance for alterations to buildings under these codes is 4% a year over 25 years on a straight line basis. More information about the IBA code and about the ABA code is available. Expenditure on “qualifying hotels” can be eligible for allowances under the IBA code.

Part 2: Examples of the tax treatment of particular types of expenditure on:

Ramps

The cost of building or installing a permanent ramp to facilitate access by members of the public is not normally allowable for tax purposes, because alterations to the fabric of commercial buildings do not normally qualify for capital allowances.

However, if the work is carried out to an industrial or agricultural building or “qualifying hotel” then relief will be given for the expenditure at the rate of 4% a year, under the Industrial buildings allowance (IBA) code or agricultural buildings allowance (ABA) code.

Businesses that buy moveable ramps that are not permanently fixed to the building will be able to claim PMAs on the cost of the ramp.

Toilets and washing facilities

Minor adjustments, such as changing doors on cubicles from opening inwards to opening outwards, would normally be wholly deductible for tax purposes as revenue expenditure.

The costs of making building alterations to toilets (for example, to widen a doorway to facilitate wheelchair access) would not normally be allowable for tax purposes, if the building being altered is a commercial building, such as a shop or office. But in the case of an industrial or agricultural building or qualifying hotel, the alteration costs would qualify for IBA or ABA capital allowances at 4% a year.

The cost of any new sanitary ware would qualify for PMAs and the costs of altering the premises, which are “incidental” to the installation of that sanitary ware, would also qualify for allowances at the P&M rate.

here could be uncertainty in some cases about the extent to which alterations are “incidental” to the installation of the sanitary ware. But where the sanitary ware is specifically purchased to comply with DDA requirements, Inspectors will take a broad view regarding normal installation costs.

Signs

The costs of signs of a permanent nature will qualify for PMAs in full.

There will also be instances where expenditure on, say, affixing warning transparencies on glass doors or similar surfaces will qualify for relief as a revenue expense. The use of coloured paint to make things easier to see (by, for instance, painting doors, step edges, or passages in contrasting colours) is normally considered to be a revenue expense of redecoration and is allowable in full for tax purposes.

Hand rails

Where businesses replace existing handrails with special handrails to ease access for disabled people, the expenditure would normally be accepted as a repair and would be deductible in full.

Where new handrails are installed for the specific purpose of helping customers with mobility impairments, the cost would constitute capital expenditure but would qualify for PMAs.

Lighting

Normally, general lighting (which is part of the premises, rather than plant or machinery used in the trade) does not qualify for capital allowances.

However, the Inland Revenue will accept that where special lighting is specifically required for the purposes of that trade, the lighting will qualify for PMAs. For example–

  • special anti-glare lighting, if needed for the purposes of the trade, or
  • additional lighting, installed specifically in, say, sales areas or their equivalent, to make it easier for disabled people to shop

will qualify for capital allowances.

Furthermore, where the lighting does qualify for capital allowances, if the lighting appears on the Energy Technology Criteria List 100% first-year allowances can be claimed.

Internal and external doors

Usually, doors are considered to be part of the premises and do not qualify for capital allowances. As such, no allowances would normally be due on installing new doors.

But where a door is no longer fit for use, it is likely that the cost of replacing it would qualify for relief as a repair, and so would be wholly deductible as a revenue expense. It would, however, be exceptional that a door was no longer fit for use and needed to be replaced in its entirety.

Quite often simply replacing a traditional door handle with a D-shaped or similar handle enables service providers to provide improved access.

A door handle would normally be an integral part of the door to which it is affixed, with the result that it would not qualify for PMAs. Any subsequent replacement of the door handle would, however, count as a repair of the door, as so would be allowable as a revenue expense. Some mechanical door handles may not qualify as a repair, where they are actually an improvement over the previous handle, but they could qualify for PMAs as machinery.

Lifts

Where expenditure is incurred on constructing a new commercial building the cost of constructing the lift shaft is not allowable.

However, the cost of replacing an existing lift with a modern lift will qualify for PMAs. And, where there is no existing lift, the cost of the lift itself will qualify for capital allowances as P&M. In addition, if incidental to the cost of installing the lift machinery, the costs of installing the lift shaft will also qualify for PMAs.

Steps and stairs

Expenditure on knocking down steps and replacing them with ramps will normally not be allowable. However, expenditure on adding fluorescent and coloured strips to the edges of steps, approaching and within business premises, to assist access by visually impaired people, will be allowed as revenue expenditure on repairs and maintenance.

Alterations to walls and floors

Alterations to the fabric of a building are not normally allowable for tax purposes, unless the building is an industrial or agricultural building or qualifying hotel or unless the alterations are incidental to the installation of plant or machinery. So any expenditure on making new doorways or widening existing doorways would not normally qualify for relief.

However, repairs to floors, for example, to level out uneven surfacing due to wear and tear over time, would be allowable as a revenue expense.

Also, painting walls or floors in bright contrasting colours, to assist access by visually impaired people would normally be considered to be redecoration and so would be allowed as revenue expenditure on repairs and maintenance.

Car parks

Where the expenditure consists, for example, of redefining parking areas by repainting parking bays to provide wider, designated bays for disabled parking, such costs would normally be considered to be allowable as revenue expenditure on maintenance.

Where the work is more substantial, for example, to include car park resurfacing, then as long as there is no improvement element, the expenditure will generally be allowable as normal revenue expenditure on repairs.

Paths

Normally expenditure on paths or land does not qualify for capital allowances. However there is a distinction between improving and repairing property. While expenditure on improvements generally counts as capital expenditure (which does not normally qualify for allowances) expenditure on repairs is usually accepted as a revenue expense, which is allowable in full for tax purposes.

Thus, where a business incurs expenditure on its paths in order to remove obstacles that could present a danger to the disabled, for example, expenditure on-

  • replacing cracked or uneven paving slabs, or
  • cutting back protruding or overhanging objects, grass or other vegetation

the expenditure will count as revenue expenditure and will be allowable in full

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