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 question under s.18(1) is whether the warehouse is in use for the purposes of a trade which consists in the storage of qualifying goods and materials.’ and ‘for an operation to be part of a trade within the meaning of s.18(2) it must itself be an activity in the nature of a trade. As s.18 itself demonstrates a trade for these purposes is not limited to the selling of goods and can include both manufacturing and processing operations. But like Lightman J, I am not persuaded that storage as a trade in s.18(1) and as part of a trade in s.18(2) involve the application of quite different tests. Section 18(2) operates only to expand the definition contained in s.18(1) not to alter it. ‘ Although the storage of the qualifying goods in this case is carried out in a separate building and on a quite different scale, it is nonetheless carried out to support the company’s wholesale trading operation and not as a trading or commercial activity in itself. On my view of s.18(2) that is not enough.
Judges:
Patten J
Citations:
[2006] EWHC 1832 (Ch), Times 11-Aug-2006, [2006] BTC 829, [2006] STI 1919, [2007] STC 721
Links:
Statutes:
Capital Allowances Act 1990, Capital Allowances Act 2001
Jurisdiction:
England and Wales
Citing:
Cited – Kay v Burrows HL 1931
The House considered whether premises (the greater part of which was used for the storage of rags awaiting processing, sorting or subsequent despatch) fell within the proviso to s.3(1) which excluded premises ‘primarily occupied and used [for the] . .
Cited – Dale (HM Inspector of Taxes) v Johnson Brothers 1951
(Year?) The taxpayer claimed an industrial buildings allowance against his tax liabilities for a warehouse used as storage as a trade in itself. Two thirds of the use was for storage of finished goods awaiting collection or delivery. The taxpayers . .
Cited – Saxone Lilley and Skinner (Holdings) Ltd v Commissioner of Inland Revenue HL 1967
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 . .
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 . .
Wrongly Decided – Crusabridge Investments Ltd v Casings International Limited 1979
The landlord of light industrial premises sought damages from his tenant for breach of the user covenant in the lease. This permitted the premises to be used, inter alia, as an ‘industrial building or structure’ as defined by the Capital Allowances . .
Cited – Kilmarnock Equitable Co-operative Society Ltd v Inland Revenue Commissioners SCS 16-Feb-1966
Income Tax, Schedule D – Profits Tax – Capital allowances – Industrial building or structure – Building for screening and packing coal – Whether coal subjected to a process – Whether building used for purpose ancillary to a retail shop – Income Tax . .
Cited – Vibroplant Ltd v Holland (HM Inspector of Taxes) CA 1980
The use of the buildings for servicing and repairing the plant which Vibroplant wished to hire out, was an essential part of Vibroplant’s business of plant hire operators and part of their trade. Although not required to decide the point, the court . .
Cited – Rolls Royce Motors Ltd v Bamford 1976
The court was asked whether the new state owned company which took over some of the assets and undertaking of Rolls Royce Ltd following its insolvency was entitled to carry forward and set against its profits the losses of the old company up to the . .
At SCIT – Maco Door and Window Hardware (UK) Ltd v Revenue and Customs SCIT 25-Oct-2005
SCIT CAPITAL ALLOWANCES – industrial buildings allowances – building used to house goods manufactured by the Appellant’s Austrian parent company for sale to wholesalers in the UK to be used in manufacture – . .
Cited by:
Appeal from – Maco Door and Window Hardware (UK) Ltd v HM Revenue and Customs CA 19-Jun-2007
Correct classification, for the purposes of capital allowances, of expenditure on a building provided for the business of the appellant. . .
At Divisional Court – 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.
Corporation Tax
Updated: 07 July 2022; Ref: scu.243331