Terra Firma advocate, Philip Simpson, successfully represented the taxpayer in the recent First-tier Tax Tribunal case of Cairnsmill Caravan Park v Revenue & Customs [2013] UKFTT 164 (TC).

The case concerned the replacement of some grass at a caravan park with hard standing. The question was whether the cost incurred was revenue or capital. The caravan park consisted of an area for static caravans; a smaller area for touring caravans; various general buildings; and a wooded area for guests to use. What was replaced was the pitches for the touring caravans. The total surface area replaced was 3 acres out of the five acres allotted to touring caravans, and the 35 acres that made up the total site. The reason for changing from grass to hard standing was that if new grass had been laid, the touring area could not have been used for two seasons, while the grass matured. A comparison of grass and hard standing revealed various advantages and disadvantages of each.

The First-tier Tribunal held that in considering whether the expenditure was revenue or capital, it was first necessary to identify the entirety that was being operated upon. In the context, this was the caravan park as a whole, and not just the touring area. This was because the various different parts of the site were physically and commercially integrated. As a whole, that entirety was not improved by the hard standing, nor was its character changed.  Accordingly, the expenditure was revenue, and not capital.