CAPITAL
ALLOWANCES – artificial turf for football pitch – whether the relevant item of
plant is the pitch or the turf – the turf – whether the turf is used in the trade
or the setting for the trade – used in the trade
- This
is an appeal by Anchor International Limited against assessments to corporation
tax for the accounting periods ended 30 April 1995 to 1998. The Appellant was
represented by Mr Julian Ghosh, and the Commissioners of Inland Revenue by Miss
Jane Paterson.
- The
issue is whether capital expenditure incurred by the Appellant in respect of the
construction of five-a-side football pitches on the excavation, infilling, draining,
terram and synthetic grass is expenditure on the provision of plant and machinery.
- I
heard evidence from Mr William Pomfret, contracts manager of G Thornton (Contractors)
Limited who has over fifteen years experience of the synthetic sports carpet industry,
and Mr William Buchanan, financial controller and then financial director of the
Appellant until 1999. I also had the benefit of seeing the Appellant’s pitches
at Sighthill in Edinburgh.
- There
was an agreed statement of facts as follows:
The
Appellant and the nature of the trade
- The
appellant company is Anchor International Limited ("the Appellant").
The Appellant was incorporated in Scotland in February 1987 with company registration
number SC103260. The Company commenced trading on 15 June 1988.
- The
Appellant was established with widely drawn objectives which are described in
the Memorandum of Association. Since the commencement of trading the actual trading
activity carried on by the Appellant assessable to corporation tax under Schedule
D Case I has comprised the provision of leisure facilities at various sites throughout
the UK. As at 30 April 1998 the Appellant provided both outdoor and indoor leisure
facilities at five sites in Scotland and four sites in England.
- As
at 30 April 1998 the outdoor facilities comprised between 8 and 12 pitches specifically
designed for five-a-side football matches. There was also a clubhouse building
on each site providing all or a combination of indoor facilities, including shower
and changing rooms, snooker and pool tables, coin-operated gaming machines, function
rooms and bars. These facilities are available to persons using the pitches.
- In
view of the popularity of the football facilities the Appellant operates an advance
booking system for the five-a-side pitches. Block bookings are made by clubs which
form together and play each other on pre-arranged dates as part of regular five-a-side
football leagues. Clubs enter into formal block booking agreements for a series
of at least 10 bookings. Under these agreements the Appellant reserves pitches
for the relevant dates and times and the club undertakes to pay the appropriate
charges for the use of the pitches on each occasion during the booking period.
- In
the four accounting periods up to 30 April 1998 the Appellant’s turnover may be
analysed as follows:
| Accounting
period ended
30 April | 1995 |
1996 |
1997 |
1998 |
| | | | | | | | | |
| Pitch
and ball hire | 2,987,707 |
70.4% |
3,203,373 |
70.7% |
3,639,158 |
71.3% |
3,939,040 |
70.6% |
| Booking
cards | 18,642 |
0.4% |
19,810 |
0.4% |
19,852 |
0.4% |
23,030 |
0.4% |
| Locker
income | 56,721 |
1.3% |
46,105 |
1.0% |
46,933 |
0.9% |
46,166 |
0.9% |
| Bar
and food | 970,290 |
22.8% |
1,037,115 |
22.9% |
1,190,272 |
23.3% |
1,256,133 |
22.5% |
| Amusement
machine | 66,216 |
1.6% |
69,444 |
1.5% |
86,085 |
1.7% |
102,420 |
1.8% |
| Other
income | 147,360 |
3.5% |
157,788 |
3.5% |
124,037 |
2.4% |
211,505 |
3.8% |
| | | |
| |
| |
| |
| | £4,246,936 | |
£4,533,635 | |
£5,106,337 | |
£5,578,294 | |
The
nature of each five-a-side football pitch
- At
all the sites operated by the Appellant the game of five-a-side football involves
the use of rebound boards on all four sides. Hard nets are mounted along the top
of these boards behind each set of goals. Wire mesh fencing is mounted along the
top of these boards at both ends of the outside perimeter of the pitches. Soft
nets are hung above the rebound boards at the sides between individual pitches
and are also hung above the hard nets and the wire mesh fencing. In addition each
pitch has separately dedicated floodlights.
- In
order that the pitches might be used for 364 days each year the Appellant provides
a playing surface of a sand-filled synthetic grass "carpet". This synthetic
grass carpet is laid on top of a semi-permeable terram which overlays a loose
stone drainage system. This playing surface provides good bounce and also both
spring and slide for the players. The synthetic grass carpet is laid in strips
which can be lifted by a specialist contractor and replaced when they become worn
out.
- The
standard dimensions of each five-a-side football pitch are approximately 32.1m
x 23.1m.
The
capital expenditure
- It
is agreed that the cost of construction of the clubhouse building is not eligible
for capital allowances.
- It
is also agreed that the cost of the land underlying the five-a-side pitches is
not eligible for capital allowances.
- The
capital expenditure on the construction of the actual five-a-side pitches has
been analysed into separately identified elements as shown in Appendix A. This
analysis relates to the expenditure at Sighthill, Edinburgh. The Sighthill premises
were largely constructed during the accounting periods ended 30 April 1996 and
1997. It is believed that the Sighthill premises are broadly typical of the locations
constructed by the Appellant in the four accounting periods to 30 April 1998.
It is further agreed that the decision of the Special Commissioners in relation
to the capital expenditure at Sighthill, as referred to in paragraph 4(12) will
be applied to any identical capital expenditure incurred by the Appellant at other
locations during the four accounting periods through to 30 April 1998. The decision
of the Special Commissioners, subject to any appeal, will also be applicable to
any identical capital expenditure incurred by the Appellant in subsequent accounting
periods, provided that there is no material change in the law as regards such
capital expenditure.
- The
first category of expenditure relates to the football pitches. The Inspector of
Taxes agreed claims for capital allowances in respect of similar expenditure for
periods up to 30 April 1994. A subsequent Inspector of Taxes formed a different
view on the application of the law for later periods. It is the view of the Inland
Revenue that the original decision to grant allowances was incorrect but that
it is precluded from re-opening the assessments for those periods by virtue of
the decision in Scorer v. Olin Energy Systems Ltd [58 TC 592].
- It
is agreed that the second category of expenditure comprising the goal posts, rebound
boards and floodlights is all expenditure on the provision of plant which is eligible
for capital allowances.
Description
of qualifying expenditure under appeal
Preliminary
and investigative works
- In
order for the design of the five-a-side pitches to be finalised it is necessary
to undertake some preliminary investigative research into the site. This will
usually involve two separate studies. A ground investigation report will be required
to establish the soil conditions, nature and depth of topsoil, water-table level,
the stability of the ground and make up of the formation the pitch base will be
laid upon. A topographical survey is required to establish levels over the site
to determine the extent of any cut and fill exercise required. In addition this
may determine the design of the pitch drainage to utilise any natural fall in
the site levels.
Excavation
works
- The
ground investigation report will highlight the expected extent of excavation but
it is likely that a vegetation and topsoil strip reducing levels by approx 200-300mm
will be required to expose the formation. Depending on how uneven the site is
a cut and fill exercise may be required to bring the pitch area to a maximum gradient
of 1:100. The eventual gradient of the pitch area will determine the drainage
design and at this point a series of lateral stone filled drainage trenches will
be cut into the formation. Once the formation has been trimmed and proof rolled
the pitch build up process can begin.
Pitch
build up
- First,
the prepared and rolled formation will have a layer of terram geotextile laid
upon it. This is to prevent the stone pitch base from being contaminated by the
formation and keep the stone base clean whilst allowing it to drain freely. A
layer of stone will be laid upon the terram. The thickness of the stone layer
will be dictated by the ground conditions and the stability of the formation.
Between 200mm and 300mm of stone is usual for most conditions. The stone to be
used must satisfy a very tight specification. M.O.T. Type 1 with a limited amount
of fines and which is not frost susceptible must be used. Certificates must be
provided to ensure that all loads supplied comply with the specification. The
stone base is laid in layers of no more than 100mm, rolled and compacted to give
a firm but porous base. The final layer is laid by a laser controlled paving machine
to ensure that the base is within the tolerances required for playing surfaces.
Low spots are levelled with a blinding layer of 6mm to dust Type 1 material with
the same limited amount of fines to ensure porosity. Once the stone base has been
prepared, rolled and levelled it receives a further layer of terram geotextile
material. This is used to provide a porous barrier over the stone, to protect
the underside of the synthetic grass carpet and to keep it clean. The formation
of all of the pitches at Sighthill was built up as one single section prior to
the installation of the synthetic grass carpet on each of the ten separate pitches.
The
synthetic grass carpet
- A
photocopy of a brochure issued by the manufacturer who supplied the synthetic
grass carpet which is installed at Sighthill was available to the Tribunal (not
reproduced).
Installation
of the synthetic grass carpet
- The
synthetic grass carpet is laid onto the terram layer. It is laid in strips of
varying widths of up to approximately 3-4 metres wide. The strips are joined in
a similar method to the way domestic carpets are joined. The two edges of each
strip are butted together and then folded back. A piece of backing material is
laid underneath the join to which adhesive is applied. The edges are then folded
back onto the backing material to form the joint. The sand in-fill used on this
type of synthetic grass carpet serves two purposes. First, the weight of the sand
anchors the synthetic grass carpet to the base and stops it from moving. Secondly,
the sand fills the spaces between the tufts of the synthetic grass carpet to keep
the pile upright giving the surface its durability and playing characteristics.
The depth of the synthetic grass carpet is 25mm. Approximately 25kg to 30kg of
sand is applied per square metre, depending on sand type and grade.
Life
expectancy and replacement of the synthetic grass carpet
- The
life expectancy of a newly installed surface will be determined mainly by the
level of use. Experience has shown that the most intensively used pitches will
require replacement after approximately five to six years whilst lesser used pitches
can last up to eight or nine years. The manufacturers provide a guarantee for
a period of seven years. The nature of five-a-side football dictates that the
strip of turf up the centre of each playing area is subject to more use and wear
than those up the sides of each pitch. It is often possible when a pitch is completely
resurfaced to salvage the turf from the sides to replace worn turf up the centre
of other pitches showing signs of wear. In addition this material can be used
to patch and repair areas of turf which are damaged.
The
capital allowances under appeal
- The
aggregate amount of the expenditure which is claimed as eligible for writing down
capital allowances at Sighthill is set out in Appendix A. The aggregate amount
of capital expenditure on the Sighthill pitches on which capital allowances is
claimed aggregates to £297,863. The qualifying expenditure under appeal on the
excavation, infilling, drainage, the terram and the synthetic grass carpet included
in this amount is £195,456.
- The
appeals relate to the four accounting periods up to and including the year ended
30 April 1998. Similar amounts of capital expenditure have been incurred at other
locations in the succeeding accounting periods.
Appendix
A
| | |
[Para
4(12)] | [Para
4(13)] |
| Accounting
period ended
30 April |
Total
| Excavation,
infilling, drainage,
terram and carpet |
Goal
posts,
rebound boards
and floodlights |
| |
£ |
£ |
£ |
| | | | |
| 1996 |
13,361 |
13,361 |
- |
| 1997 |
271,396 |
168,989 |
102,407 |
| 1998 |
13,106 |
13,106 |
- |
| | |
|
|
| | 297,863 |
195,456 |
102,407 |
- From
the oral evidence I find that when the carpet wears out it is either rolled up
in strips or cut into squares with the sand on it. If some of it is to be re-used
the sand can be sucked out of the carpet and the original strips would be cut
into two for taking up. Re-carpeting would take 5 days weather permitting of which
2 days would be spent taking up the old carpet and three days laying the new one.
It is common to re-use part of the carpet as used carpet fits in better with the
existing carpet than new carpet. It is possible to purchase replacement carpet
from a different contractor.
- It
is possible to play all the time on the artificial carpet so that bookings can
be made in advance. With real turf the maximum use would be one game per evening
in the summer or one game per week in the winter which would not be economic.
The use of the carpet is not restricted to five-a-side football; it would be possible
to play other sports.
Whether
the item of plant is the pitch or the carpet, and whether it is a structure
- The
Revenue’s main contention is that the expenditure is excluded from capital allowances
for plant and machinery by Schedule AA1, introduced by the Finance Act 1994. Although
logically one should first decide whether the expenditure qualified as expenditure
on machinery or plant it is convenient to deal with this aspect first as if the
expenditure is excluded it is unnecessary to decide whether it would have qualified.
That schedule deals first with buildings, which are not relevant, and then with
"Structures, assets and works." Paragraph 2 is as follows:
"2.—(1)
For the purposes of this Act expenditure on the provision of machinery or plant
does not include any expenditure on—
(a)
the provision of structures or other assets to which this paragraph applies, or
(b)
any works involving the alteration of land.
(2)
This paragraph applies to any structure or other asset which falls within column
l of the following Table ("Table 2").
(3)
Sub-paragraph (1) above does not affect the question whether—
(a)
any expenditure falling within column 2 of Table 2, or
(b)
any expenditure on the provision of any asset of a description within any of the
items in column 2 of Table 1,
is
for the purposes of this Act expenditure on the provision of machinery or plant.
(4)
Table 2 is to be read subject to the notes following it.
TABLE 2
| (1) Structures
and assets A
Any tunnel, bridge, viaduct, aqueduct, embankment or cutting. B
Any way or hard standing, such as a pavement, road, railway or tramway, a park
for vehicles or containers, or an airstrip or runway. C
Any inland navigation, including a canal or basin or a navigable river. D
Any dam, reservoir or barrage (including any sluices, gates, generators and other
equipment associated with it). E
Any dock. F
Any dike, sea wall, weir or drainage ditch. G
Any structure not within any other item in this column. |
(2) Expenditure
which is unaffected by the Schedule 1
Expenditure on the alteration of land for the purpose only of installing machinery
or plant. 2
Expenditure on the provision of dry docks. 3
Expenditure on the provision of any jetty or similar structure provided mainly
to carry machinery or plant. 4
Expenditure on the provision of pipelines or underground ducts or tunnels with
a primary purpose of carrying utility conduits. 5
Expenditure on the provision of towers provided to support floodlights. 6
Expenditure on the provision of any reservoir incorporated into a water treatment
works or on the provision of any service reservoir of treated water for supply
within any housing estate or other particular locality. 7
Expenditure on the provision of silos provided for temporary storage or on the
provision of storage tanks. 8
Expenditure on the provision of slurry pits or silage clamps. 9
Expenditure on the provision of fish tanks or fish ponds. 10
Expenditure on the provision of rails, sleepers and ballast for a railway or tramway.
11
Expenditure on the provision of structures and other assets for providing the
setting for any ride at an amusement park or exhibition. 12
Expenditure on the provision of fixed zoo cages." |
[Notes
to table not reproduced]
- The
first column of Table 2 excludes from allowances on plant and machinery expenditure
on structures and assets. Structures are defined in paragraph 5: "‘structure’
means a fixed structure of any kind, other than a building…". The reference
to assets in the heading of column 1 is presumably to the words in brackets in
item D. Although the heading of paragraph 2 also refers to works which is not
repeated in the heading of the table, some of the items, particularly item C,
might be described as works rather than structures. Column 2 then prevents the
exclusion from applying to certain listed and extremely diverse items which are
presumably the subject of previous decisions, such as IRC v Barclay Curle
45 TC 221 (item 2), Schofield v R&R Hall 49 TC 538 (item 7).
- Mr
Ghosh for the Appellant formulates his claim as being for allowances on the carpet,
which is not fixed and is not a structure and so is not affected by Table 2. The
expenditure on the site described above as "excavation works" and "pitch
build-up" is covered by item 1 of column 2. In support of this approach he
cited Wimpey International Ltd v Warland 61 TC 51:
"Mr
Moses, for the Revenue, argues that before you even get to apply any test, whether
the functional test or any other test, you musrt first determine the subject-matter
of the enquiry…. Where there are two entities, as in Jarrold v John Good 40
TC 681, namely, the premises and the partitions (it was conceded that the partitions
were not "part of" the premises) you apply the test to the partitions
as a separate entity. But where there is only one entity whether it be a dry dock
or a silo or a laboratory, you apply the test to that entity as a whole."
(per Lloyd LJ at pl109A)
Mr
Ghosh contends that the carpet is an asset in its own right being replaceable
without affecting the pitch as a whole.
- Miss
Paterson for the Revenue looks at the whole expenditure on the pitch and contends
that it is excluded from being plant by item G in the first column as a structure.
Miss Paterson contends that the cases show that the item must be looked at as
a whole and not artificially dissected. It had been the Crown’s contention in
Barclay Curle that the excavation expenditure should be looked at separately
but the majority in the House of Lords did not agree:
"It is unrealistic,
in my view, to consider the concrete work in isolation from the rest of the dry
dock. It is the level of the bottom of the basin in conjunction with the river
level which enables the function of dry docking to be performed by the use of
dock gates, valves and pumps. To effect this purpose excavation and concrete work
were necessary." (Lord Guest at page 245)
"Furthermore,
I regard the ‘piecemeal’ approach as unreal. The dry dock ought, I think, for
present purposes to be regarded as a whole, with all its appurtenances of operating
machinery, power installations, keel blocks, tubular side shores, and so on."
(Lord Donovan at page 249G)
The
same approach was adopted to the expenditure on the whole silo in Schofield
v R&H Hall Limited 49 TC 538 and the pools (including lavatories, showers,
shops, laundries, children’s playground, amusement hall, licensed bars) in Cook
v Beach Station Caravans Limited 49 TC 514. Here the pitch had been built
as a single unit; the carpet could not function without the works underneath it;
the carpet was not readily movable; it remained until it was replaced and could
not be moved as a whole, or even in the same strips in which it was laid; it had
to be scrapped by cutting it up; the carpet had 22 tons of sand resting on it.
The item was the pitch as a whole, not the carpet.
- She
contended that here the pitch was something that had been constructed and was
a structure. She cited IRC v Smyth [1914] 3 KB 406, a case on land value
duty:
"I
think a structure is something artificially erected, constructed, put together,
of a certain degree of size and permanence, which is still maintained as an artificial
erection, or which, though not so maintained, has not become indistinguishable
in bounds from the natural earth surrounding." (page 421-2)
She
also cited South Wales Aluminium Co Ltd v Neath Assessment Committee [1943]
2 All ER Annotated 587:
"As
used in its ordinary sense I suppose it [structure] means something which is constructed
in the way of being built up as is a building; it is in the nature of a building."
(page 592H)
- Mr
Ghosh replied that the issue was whether the carpet retained its separate identity,
not whether it was usable without the works underneath. The cases cited dealt
with examples where the components did not retain their separate identity.
- Miss
Paterson also referred to Hansard, to which Mr Ghosh did not object; but he contended
that the conditions laid down in Pepper v Hart [1993] AC 593 for reading
Hansard, that the legislation was ambiguous or obscure, and that the difficulty
can be resolved by a clear statement directed to the matter in issue (per Lord
Oliver at page 620D), were not satisfied.
- On
the meaning of "fixed" in the definition of "structure" both
parties contended that this was not to be understood as a technical term of land
law. Mr Ghosh said that as a matter of fact the carpet was not fixed; it was resting
on the prepared base weighed down by sand without any connection to what was underneath.
Miss Paterson said that the pitch as a whole as clearly fixed and even if one
looked at the carpet alone as a realistic matter it was fixed; it was weighed
down by 22 metric tons of sand and could not be taken up as a whole and used elsewhere.
Reasons
for the decision
- The
parties approach this question from different ends: Mr Ghosh from the point of
view of the carpet alone (with the works to the site being treated as the alteration
of land for the purpose only of installing the plant, to quote the words of item
1 of column 2 of Table 2); and Miss Paterson from the point of view of the pitch
as a whole, because it is constructed as an entity, the carpet on its own being
no use for playing football on without the works underneath it. The approach is
critical to the questions whether something is fixed or is a structure. The pitch
is fixed and accordingly could be a structure; the carpet is not fixed and is
certainly not a structure.
- I
prefer Mr Ghosh’s approach. It seems to me that the carpet has a separate identity;
it will wear out in five to six years with frequent use, or eight or nine years
with less use. If part of the carpet wears out before then, that part can be patched.
When it is completely worn out, the works underneath are retained and merely rolled
and filled in if there has been subsidence and another carpet is laid on top.
A different supplier might supply the replacement carpet. This seems to me analogous
to a heavy machine standing on a concrete base. The machine cannot be used without
the base but the machine can be replaced and a new one put on the same base. The
relevant item of plant is the machine which retains its separate identity. Here
it is the carpet, not the pitch, even though the carpet cannot be used without
the preparatory works to the ground on which the carpet is laid, just as the machine
cannot be used without the base.
- Having
decided that the relevant item of plant is the carpet I find that it is not fixed.
Whatever "fixed" means in the context of the definition of structure,
a carpet resting on the ground, however heavily weighed down with sand, is not
fixed to anything. The fact that it cannot be moved as a whole or even in the
same size rolls in which it was installed does not mean that it is fixed.
- Looking
at the meaning of "structure" in the context of the first column of
Table 2 the carpet on its own is clearly not a structure. Having decided that
the relevant item of plant is the carpet it is not necessary to decide whether
the pitch is a structure but I would have decided that it was not. On the ordinary
meaning of language, the pitch is not a "fixed structure of any kind, other
than a building." Land has been dug out and filled in with stones and terram
sheeting with a carpet resting on top. The examples of structures in column 1
are large civil engineering items, such as tunnels, roads, dams, docks and dikes.
The pitch is not like any of them and is not constructed in the way one expects
a structure to be constructed. Even roads in item B are much more fixed and constructed.
Some of the items excluded by column 2 are smaller, such as fish tanks in item
9 and fixed zoo cages in item 12, which means that they must be caught by column
1, but they require construction in the sense of putting items together. Here
the only "construction" is laying stones, terram sheeting and the carpet
on the ground and weighing it down with sand. I agree with Mr Ghosh that the conditions
for referring to Hansard are not satisfied. The word "structure" is
not ambiguous; it is merely that one has to decide whether something is a structure
or not. In any case there is no clear statement directed to this issue.
- Accordingly,
the expenditure on the carpet is not excluded by item G and the allowances for
expenditure on the land are preserved by item 1 of column 2. I next consider whether
the expenditure is on plant.
Whether
the carpet is plant or the setting
- Mr
Ghosh contended that the distinction is between an item which plays a specific
part in the generation of profits of the taxpayer’s trade (which is plant, whether
or not it also constitutes premises), and an item which, although used by the
taxpayer for trade purposes, is not, itself, exploited to earn profits but performs
a general housing function (which is not plant). The distinction is not between
the mere description of an item as either outside or within the description of
a trader’s "premises". The murals in the hotel in IRC v Scottish
& Newcastle Breweries Ltd 55 TC 252 play an active part in the profit-making
apparatus of the hotelier and constitute plant, rather than the setting or premises
of the trade:
"If
the object has a function in the promotion of the taxpayer’s business, be it an
active or a passive function, then I think that, prima facie in light of
the accepted width of construction to be put on the word, such an object may not
unfairly or improperly be regarded as part of the taxpayer’s ‘plant’. It may well
be that it is impossible a priori to define precisely a line of demarcation
between what is ‘plant’ and what is ‘setting’: the two can overlap or coincide,
they are not and cannot be mutually exclusive, so that description as part of
‘setting’ is not of itself fatal to identification of objects as ‘plant’ at the
same time." (per Lord Cameron at page 267A)
Similarly
the dry dock in Barclay Curle was the premises in which the trade was carried
on but it was also the item with which it was carried on, since it was used in
the process of generating profits. He contended that the observations of the Special
Commissioners in Family Golf Centres Limited v Thorne [1998] STC (SCD)
106 that items which are integral to the conduct of the trade but which are also
part of the trader’s premises cannot be plant, were incorrect although not disagreeing
with the result. The cases where premises were held not to be plant where those
where the premises performed no function, such as the floating ship which was
the place which housed the restaurant in Benson v Yard Arm Club Limited 53
TC 66:
"The
fact that a ship or hulk could be used as plant in many businesses does not enable
a taxpayer to claim capital allowances for a ship or hulk which performs no function
in the business actually carried on by the taxpayer Company, other than the function
of premises providing accommodation for that business." (per Lord
Templeman at page 89B)
The
same was true of the football club stand in Brown v Burnley Football Club [1980]
STC 424:
"The
football matches take place and the spectators come to watch within, rather than
by means of, the stadium" (page 437h)
and
the school buildings housing a gymnasium and chemistry laboratory in St John’s
School v Ward 49 TC 524:
"Education
is not carried out with these particular buildings but in these particular buildings;
by contrast, the climbing ropes seem to me to be part of the educative machinery."
(page 533E)
- Mr
Ghosh contended that if something is plant it does not matter if it also performs
a different function. This is the third principle identified by Sir Donald Nicholls
V-C in Carr v Sayer [1992] STC 396:
"…equipment
does not cease to be plant merely because it also discharges an additional function,
such as providing the place in which the business is carried out. For example,
when a ship is repaired in a dry dock, the dock also provides the place where
the repair work is carried out. That is no more than the consequence of the extensive
size of a piece of fixed plant." (page 402e)
- Miss
Paterson’s primary contention was that the pitches were the premises at which
the Appellant carried on its business, not with which it carried it on, with the
result that the expenditure failed the premises test.
"The
premises, whether an office or a factory or a warehouse or whatever, at which
or in which a business is carried on would not normally be understood as intended
to be embraced by the expression ‘machinery or plant’." Carr v Sayer [1992]
STC 396, 402b.
"There
can be no doubt, therefore, as to the main principles to be applied, and the short
question in this case is whether the partitioning is part of the premises in which
the business is carried on, or part of the plant with which the business is carried
on." Jarrold v John Good & Sons Limited 40 TC 681, 696 per
Pearson LJ.
It
is not necessary that the premises should be a building, as in the case of the
tarmac areas used for circulation, queuing and parking for the car wash in Anduff
Carwash Limited v Attwood 69 TC 575: "In functioning as an area over
which cars are driven and parked, the site functioned as premises" (page
608I). The pitch is the setting for the game. It is the pitch that generates the
income. Even if the carpet is looked at separately it is part of the setting.
She contends that the football is played on not with the carpet,
a distinction with which Mr Buchanan agreed. The carpet itself does not generate
any income.
Reasons
for the decision
- It
seems to me that one can regard the pitch (if one looks at the whole) or the carpet
as both the setting and the means by with which the business is carried on. The
dual nature is no different from the dry dock in Barclay Curle, the swimming
pool at the caravan site in Cook v Beach Station Caravans Limited 49 TC
513 and the murals in IRC v Scottish and Newcastle Breweries Limited 55 TC 252. In these cases the plant was used in the trade and it did not matter that
it was also part of the place where the trade was carried on. Here the trade is
the provision of synthetic football pitches, which generates 70 per cent of the
turnover, and so in one sense the trade is the provision of the setting, but in
another sense the pitch and the carpet are the plant with which the trade is carried
on. I do not think one can make the distinction that Miss Paterson wants to make
between football being played on, rather than with, the carpet. The fact that
there are cases where plant serves both purposes shows that once the plant is
used in the trade it does not matter that it is also the setting. I shall therefore
follow the third principle identified by Sir Donald Nicholls V-C in Carr v
Sayer [1992] STC 396:
"…equipment
does not cease to be plant merely because it also discharges an additional function,
such as providing the place in which the business is carried out."
- The
carpet is the means by which the Appellant generates profits rather than merely
the setting, and is accordingly plant.
- My
decision is that the relevant item of plant is the carpet which is not a fixed
structure, the works underneath it being the alteration of land for the purpose
only of installing plant. It is the means by which the Appellant generates profits
rather than merely the setting. I allow the appeal in principle.
