Plant and machinery

What is plant and machinery: the term explained, in the accounts and on site

Plant and machinery is the collective term for the fixed and mobile equipment a business uses to carry out its work, from excavators, cranes and forklifts to compressors, boilers and production lines, as distinct from the buildings that house it and the stock it processes. The phrase does two jobs at once, one in the tax computation and one in the safety file, and they do not draw the boundary in the same place.

You will also see plant and equipment, P and M, and, in financial statements, property, plant and equipment. UK legislation uses the slightly older wording "plant or machinery". Same category of asset, different document.

What counts as plant and machinery?

The long-standing functional test in UK case law asks a simple question: is the item apparatus with which the business is carried on, or part of the setting in which it is carried on? A cold store's refrigeration plant is apparatus. The warehouse shell around it is setting.

• Mobile plant. Excavators, dumpers, telehandlers, forklifts, mobile cranes, access platforms, generators, compressors.
• Fixed plant. Production lines, conveyors, presses, overhead cranes, boilers, air receivers, lifts, hoists.
• Ancillary items. Lifting accessories such as chains, slings, shackles and eyebolts, which are plant in their own right and carry their own inspection duties.
• The grey area. Integral features and fixtures within a building, where the tax treatment often differs from the physical common sense, and where the argument with an inspector usually happens.

How plant and machinery differs from what it is confused with

Three distinctions cover almost every misclassification.

• Against buildings and land. Setting, not apparatus. A different pool for tax, and usually a different owner of the risk.
• Against stock and consumables. Plant is held to be used repeatedly. Blades, filters and grease are consumed in the using, and go to expenses rather than the asset register.
• Against fleet. Road-going vehicles are often managed separately under fleet management, with their own licensing and driver rules, even though the accounts may pool them together.

What inspection and certification duties attach to it?

This is where the term stops being an accounting label. Once equipment lifts a load, contains a pressure, or carries a person, the regime that attaches to it is statutory, and it varies by jurisdiction. Treat the following as the shape of the obligation, not as advice for your site.

United Kingdom. Under the Lifting Operations and Lifting Equipment Regulations 1998, lifting equipment needs a thorough examination by a competent person at intervals of 12 months, or every six months where it is used to lift people and for any lifting accessory, unless a written examination scheme drawn up by a competent person sets different intervals. The competent person issues a written report (HSE, thorough examinations of lifting equipment). Pressure equipment falls under the Pressure Systems Safety Regulations 2000, which require a written scheme of examination, drawn up or certified as suitable by a competent person, covering every pressure vessel, all protective devices and any pipework whose failure would be dangerous, and specifying the nature and frequency of examination (HSE, PSSR). Everything else sits under PUWER 1998, which requires work equipment to be suitable, maintained, and inspected where safety depends on the installation.

United States. There is no single general regime. Duties are set standard by standard. For construction cranes, OSHA requires an inspection by a qualified person at least every twelve months, with monthly inspections by a competent person while the equipment is in service, and documentation of the annual inspection retained for at least twelve months (OSHA 1926.1412).

Australia. The model WHS Regulations go further upstream: certain plant designs and certain items of plant, listed in Schedule 5 and including tower cranes and specified pressure equipment, must be registered with the regulator before they can be supplied or used, on top of the ordinary duty to maintain and inspect (Safe Work Australia, plant supply, design and registration).

Plant and machinery in practice: a worked example

A hire company has a 12-tonne excavator on long-term hire to a groundworks contractor. The excavator itself needs examination as work equipment. The quick hitch and the lifting eye on the dipper make it lifting equipment, so a 12-month thorough examination applies. The chains and shackles the contractor keeps in the cab are lifting accessories, so those need examining every six months. One machine, three separate obligations, and only the first one is usually on anyone's calendar.

Plant and machinery in the accounts

The same assets carry a parallel financial life. They are capitalised rather than expensed, depreciated across their useful life, and, in the UK, attract capital allowances instead of book depreciation: an annual investment allowance of up to 1 million pounds, then writing down allowances of 18 percent on the main pool or 6 percent on the special rate pool for long-life assets (GOV.UK, rates and pools). Long-life plant lands in the slower pool, which is worth knowing before you sign for a machine expected to run 25 years.

What the term is commonly confused with

• "Plant" as a factory. In American usage a plant is often the site itself. In this sense it is the equipment inside it.
• Certification as an inspection. A statutory examination is a point-in-time judgement by a competent person. It is not a warranty that the machine will be fit next week.
• The register as the reality. Asset registers drift. Machines get re-hired, sold, cannibalised and re-numbered, and the certificate follows the serial number, not the sticker.
• Availability as productivity. A certified, maintained, fully compliant machine parked in a yard is still earning nothing, which is why the asset utilisation rate gets read alongside the compliance file rather than after it.