CA21210 | Plant and Machinery Allowances (PMA): meaning of plant and machinery: customer lists

Intangible fixed asset regime takes precedence

If expenditure has been incurred by a company on acquiring a customer list, you should consider whether the intangible fixed asset regime at Part 8 CTA 2009 applies to the expenditure (CIRD44000). Capital allowances are not available for expenditure on customer lists which falls within the intangible fixed asset regime.

If the intangible fixed asset regime doesn't apply

PMAs are not available for expenditure on customer lists. A customer list is commercial know-how rather than plant or machinery. Where a person acquires a customer list what is being acquired is not just a list of customers like a directory but rather the connections with the customers. That is part of the goodwill of the business. In IRC v Muller & Co Margarine Ltd (1901) AC217, (see CG68010), Lord MacNaghten described goodwill as being:

'the benefit and advantage of the good name, reputation and connections of the business. It is the attractive force that brings in custom. It is the one thing which distinguishes the old established business from a new business at its first start.'

The goodwill is a separate asset. To the extent that expenditure on the customer lists is attributable to goodwill rather than the acquisition of a chattel containing the list (for example, the list may be contained on a portable hard drive or written on a piece of paper), it does not qualify for PMAs. In practice, the expenditure to be attributed to the chattel is likely to be either nil or negligible.

The taxpayer may claim that the list is plant because it has been written down or is saved on a portable hard drive. Most types of intangible assets are either always committed to paper or are capable of being committed to paper - including for instance a franchise agreement, licence, quota, patent, design, trademark and technical or commercial know-how. None of these qualify for PMAs because they are not plant. The list being committed to paper or saved on a portable hard drive does not matter for the purposes of determining eligibility for PMAs. There are specific allowances under separate codes for patents (CA75000) and technical know-how (CA70000), from which commercial know-how is specifically excluded (CA73000).