Taxpayer acquiring sites and building car washes – Taxpayer claiming sites single units of plant for purposes of capital allowances against corporation tax – Whether sites premises or plant – General commissioners concluding sites single units of plant – High Court holding appropriate test misapplied and remitting matter to commissioners – Court of Appeal dismissing taxpayer’s appeal
In accounting periods ended December 31 1984 to 1990 inclusive, the taxpayer acquired 78 sites throughout the UK on which it installed car washing facilities. Each site was approximately 50m by 23m. The car washing was carried out in a building called the wash hall which was approximately 20m long by 6.5m wide. On one side of the wash hall was a control room, lobby, staff WC, pump room, an open area containing the inspection covers for water tanks and a store. Outside the wash hall there were bays where two or three coin-operated units enabled the vacuuming of cars. Most of the site was covered in tarmacadum and laid out with signs and bollards. Other parts were pavement cross-overs, concrete kerbs, fencing and landscaping.
The taxpayer appealed to the special commissioners against seven assessments to corporation tax claiming that each site constituted a single plant entitling the taxpayer to capital allowances against corporation tax. The Inland Revenue accepted that 19 out of the 48 component parts of the car wash facilities qualified as plant, but claimed that nothing else qualified. The special commissioners concluded that the sites were the means whereby the taxpayer’s operation was carried out and therefore, with the exception of the boundary fencing and the landscaping, they were to be viewed as a single unit of plant. The Inland Revenue appealed contending that the site and the wash hall functioned not as plant but as premises in which the taxpayer conducted its trade. The High Court allowing the appeal and ordering the matter be remitted to the commissioners held that the latter had failed to apply or had misapplied the premises test: see Wimpy International Ltd v Warland [1987] 61 TC 51 Thus neither the site as a whole not the wash hall could be regarded as a single unit of plant. The taxpayer appealed.
Held The appeal was dismissed.
1. It was impossible to see how the commissioners, on the primary facts found by them, could have properly applied the premises test, namely whether the item was used for carrying on the business and, if so, whether the item was used as the premises or place upon which the business was conducted, and arrived at the conclusion that each site was a single unit of plant.
2. It was clear that the wash hall functioned as premises housing the machinery used and was the place where the car washing, drying and waxing were carried out, retaining noise and heat when necessary and providing protection from the elements. The control room, the lobby and the WC also clearly functioned as premises. Therefore it was impossible to say that the wash hall as a whole was apparatus functioning as plant and it was unnecessary to remit the matter to the commissioners.
Peter Whiteman QC and Brian Green QC ( instructed by Denton Hall) appeared for the appellant; James Munby QC and Timothy Brennan (instructed by the solicitor to the Inland Revenue) appeared for the respondent.