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tests in Edwards v Bairstow and Harrison. In Cole Brothers Ltd v Phillips168 the taxpayer, T, had spent money on electrical installations in a large department store (John Lewis at the Brent Cross shopping centre, London). One argument advanced by T was that the whole electrical installation was one item. This was rejected by the Commissioners; the appellate courts treated the issue as a matter of fact for the Commissioners, but the discomfort shown by the speeches in the House of Lords is marked.169 The issue arose more recently in Attwood v Anduff Carwash Ltd170 where the question was whether a car wash site was a single plant. The Commissioners held that it was, but the appellate courts held that neither the whole site nor the wash hall alone could be treated as a single unit. |
(a) Dry dock |
While there is a clear distinction between the shell of a building and the machinery currently used in it, there are considerable difficulties where a large and durable structure is created for a specific purpose. This occurred in the leading case of IRC v Barclay, Curle & Co Ltd.171 The taxpayer had constructed a dry dock, a process requiring the excavation of the site and the construction of a concrete lining. The Revenue agreed that such expenditure incurred on the dock gate and operating gear, the cast iron keel blocks and the electrical and pumping installations related to plant, but argued that, while the expenses of excavation and concreting might relate to industrial building, they did not relate to Plant and Machinery. The Revenue lost. It will be noted that while a dock is now classified as a structure, and so not capable of qualifying for allowances as plant, a dry dock is classified differently. The expenditure on the concrete lining was held to be in respect of plant because it could not be regarded as the mere setting in which the trade was carried on, but was an integral part of the means required for the trading operation. Lord Reid said that a structure which fulfils the function of plant was, prima facie, plant.172 However, later cases show that this ‘business’ or ‘function’ test must yield to the ‘premises’ test (see (b) below). CAA 2001 expressly provides that where capital expenditure is incurred on alterations to an existing building incidental to the installation of plant or machinery for the purposes of trade, allowances may be claimed in respect of such expenditure just as if the works formed part of the plant or machinery.173 |
(b) Fast food restaurant |
The fact that an item has a business use (the business test) is not enough to make it plant; an item cannot be plant if its use is as the premises or place on which the business is conducted (the premises test).174 In Wimpy v Warland,175 the taxpayer sought (unsucessfully) to claim allowances for expenditure on shop fronts, wall panels, suspended ceilings, mezzanine floor, decorative brickwork, wall finishes a trapdoor and ladder. As Fox LJ stated: |
‘‘There is a well established distinction, in general terms, between the premises in which the business is carried on and the plant with which the business is carried on. The premises are not plant. In its simplest form that is illustrated by [the] example of the creation of atmosphere in a hotel by beautiful buildings and gardens on the one hand and fine china, glass and other tableware on the other. The latter are plant; the former are not. The former are simply the premises in which the business is conducted.’’ |