The taxpayer company was the parent company of a group of subsidiaries, one of which traded as the manufacturer and retailer of shoes. The others either manufactured or sold shoes. The company built a warehouse which was let to a warehousing subsidiary (Jacksons Limited). Parts of the warehouse were used to store shoes from the manufacturing and retailing company, but most of the shoes stored there were shoes which had been delivered to the retailing companies and were held by them as stock. The holding company claimed allowances on the basis that the warehouse was used for part of the trade of Jacksons Limited consisting in the storage of shoes manufactured by the manufacturing and retailing subsidiary, but not yet delivered to a purchaser, so as to come within s.271(1)(d)(iii) of the Income Tax Act 1952. The Special Commissioners had accepted that on the evidence part of the trade of Jacksons Ltd did consist in the storage of shoes which qualified under s.271(d)(iii) but they rejected the contention that the whole building was used for that purpose. The Court of Session had held that it was not necessary to show that the building was wholly or mainly in use for the relevant part of the company’s trade. It could be a shared use, and the storage of the qualifying shoes did constitute part of Jacksons Ltd’s trade.
Held: The Court of Session’s decision was upheld. In order to qualify for relief for an industrial building is is not necessary that the qualifying use should be the sole or exclusive use made of the premises.
Lord Reid: ‘The shoes manufactured at Kilmarnock come within the scope of s. 271 (1)(d)(iii) because, when in this warehouse, they have not yet been delivered to any purchaser. But the other shoes in the warehouse have already been delivered to the Respondents or one of their subsidiary companies, having been purchased from other manufacturers. During the relevant period there were generally some 500,000 pairs of shoes in the warehouse at any one time, of which a third or so had come from Kilmarnock and the remaining two-thirds or so from outside manufacturers. While in the warehouse these shoes were not kept separate. They were classified so that in each part of the warehouse one would generally find some of the Kilmarnock shoes and some of the others.
The trade of this warehouse keeper is storing shoes from both these sources, and the contention of the Respondents is that, within the meaning of s. 271(2), storing the Kilmarnock shoes is a part of his trade. The Commissioners so found, and I think that this is clearly right. I reject the argument that there is no sufficient distinction between the ways in which the two kinds of shoes are treated to enable one to say that storing the one kind is one part of the trade and storing the other kind is another part. If a trader stores or sells or otherwise deals with two kinds of goods, A and B, I think that it is the ordinary use of language to say that dealing with A is one part of his trade and dealing with B is another part, and I see nothing in the context here to justify giving any other interpretation to ‘a part of a trade’ in s. 271(2). The question therefore comes to be whether this warehouse is in use for the purposes of that part of the warehouseman’s trade which consisted in the storing of Kilmarnock shoes.
Again taking the ordinary use of language, it appears to me that it clearly was. Premises can be and often are in use for more than one purpose, and I think that the whole of this warehouse was in use for both parts of the warehouseman’s trade, because both kinds of shoes could generally be found stored in every part of it.’
Judges:
Lord Reid
Citations:
44 TC 122, [1967] 1 WLR 501, (1966) 42 TC 675
Statutes:
Income Tax Act 1952 271(1)(d)(iii)
Jurisdiction:
Scotland
Cited by:
Cited – Bestway (Holdings) Ltd v Luff (Inspector of Taxes) ChD 4-Mar-1998
The taxpayer company operated a wholesale cash and carry business from a number of self-service supermarkets. The stores sold groceries, household goods, tobacco, confectionery and various kinds of alcohol. Although the buildings were not open to . .
Cited – Revenue and Customs v Maco Door and Window Hardware (Uk) Ltd ChD 19-Jul-2006
The Revenue sought to disallow for industrial buildings allowance sums expended on warehouse premises which were to be used to store window products imported for use in other manufacturing processes.
Held: The Revenue’s appeal succeeded. ‘The . .
Cited – Maco Door and Window Hardware (UK) Ltd v Revenue and Customs HL 30-Jul-2008
The House was asked whether a warehouse used to store purchases made by the company from its parent company in Austria, was an ‘industrial building or structure’. It was agreed that the facility was used for the storage of materials for use in later . .
Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 07 May 2022; Ref: scu.244453