CA23721 - Long-life asset test is applied to the asset as a whole
Source: gov.uk (2025-03-19)


The 25 year test should be applied to an item of plant or machinery as a whole and not to its component parts. The rule in CAA01/S571 that any reference to plant or machinery includes a reference to a part of any plant or machinery cannot be used to exclude parts that are likely to be replaced within 25 years. This is because the legislation defines the asset to be a long-life asset if it has a useful economic life of at least 25 years. Where the asset as a whole falls to be treated as long-life under this rule, there is nothing in the legislation that then allows part of the asset to be excluded from the long-life asset rules.

Accounting standards require that components or parts of property, plant and equipment should be accounted for separately for depreciation purposes if either they have significantly different patterns of consumption of economic benefits (UK GAAP) or their cost is significant in relation to the total cost of the item (IAS). This does not mean that you should apply the long-life asset test to each component or part separately. You should apply it to the asset as a whole.

For example, if you receive a capital allowance claim for an underground cable system (including television, telecommunications, or electricity supply systems) the costs of installing the cables will include the costs of excavating the land and providing ducting that houses the cables. The cabling and the ducting may be recognised as separate components of the asset in the claimant’s accounts (so that they are depreciated at different rates). Where the ducting is installed as a direct incident of the installation of the cabling, the costs of the ducting and the associated excavation are, for capital allowance purposes, part of the costs incurred on the provision of the cabling regardless of the treatment in the accounts. In these circumstances, if the cabling is not itself a long-life asset, the long-life asset rules are not separately applicable to the ducting. However, if ducting is installed with the expectation that it will accommodate future upgrades to the cable network or cables owned by other entities, it may be appropriate to treat the ducting as a separate asset to the cabling on the basis that the ducting expenditure is not merely incurred as a direct incident of the initial cable installation but serves a separate purpose.

A fixture in a building or structure may be treated as a separate plant or machinery asset to the building or structure as a whole (see CA21160 (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca21160)) and it may be the case that while the fixture qualifies for capital allowances as plant or machinery the building or structure as a whole does not (as buildings and structures are generally excluded from PMAs). If the fixture is an 'integral feature' (see CA22300 (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca22300)) it will be a special rate asset regardless of its economic life and there will therefore be no need for you to consider the long-life asset test. For other types of plant and machinery fixtures, you should apply the long-life asset test to the fixture and not to the building or structure as a whole. For example, a factory building may have an expected life of 50 years. If a burglar alarm system within it has an expected life of 20 years, the burglar alarm system is not a long-life asset even though the factory building has an expected life of 50 years. But if the burglar alarm system has an expected life of 30 years, the burglar alarm system as a whole is a long-life asset even if parts of it are likely to be replaced in less than 25 years.

You should use the concept of the entity or entirety as developed by the Courts in cases about whether expenditure on a replacement part is allowable as expenditure on a repair in deciding what is the whole of the item of plant or machinery. You should not accept that the 25 year test can be applied to part of an item of plant or machinery if the cost of replacement of that part without improvement would be allowable as a repair to the plant or machinery as a whole. There is guidance about this at BIM46900 (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46900) onwards.

If there is expenditure on an improvement to an asset, you should apply the long-life test to the part of the plant or machinery that represents the improvement. This is because the improvement is treated as a separate asset for the plant and machinery legislation. The useful economic life of the improvement is the period from when the improvement is brought into use until the part representing the improvement is likely to cease to be used. For example, suppose that a printing press has an expected working life of 30 years when it is new. After 25 years there is a major refurbishment that extends the expected working life of the press to 20 years from the refurbishment. The capital expenditure on the refurbishment has a useful economic life of 20 years and is not caught by the long-life asset rules.