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Capital allowances: plant or premises revisited

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You wait for years for an interesting case on capital allowances and then almost proverbially, three turn up almost at once. I recently made reference to the case of Cheshire Cavity Storage Ltd v HMRC [2021] UKUT 50 (TCC) which concerned a claim for capital allowances for the cost of creating a cavity for the storage of gas (see Tax Journal, 2 July 2021). The function of the cavity was to store gas so that it could be safely held and released to the National Grid when required.

The Upper Tribunal went through all the old cases such as Schofield v Hall [1975] STC 353 where grain silos were held to be plant; Cooke v Beach Station Caravans [1974] STC 402 where swimming pools were held to be plant and the celebrated House of Lords decision in IRC v Barclay Curle [1969] 1 All ER 732 concerning a dry dock which also qualified as plant.

The Upper Tribunal explained that where something functioned as premises and as plant, you have to identify which is the more appropriate description. Is it ‘apparatus with which the business was carried out, or premises in which the business was carried out’? In its judgment, the expenditure on the cavities was on premises and not on plant, so the claim failed.

Hot on the heels of all this, we have the case of JRO Griffiths Ltd v HMRC [2021] UKFTT 257 (TC) which concerned a claim for capital allowances on a special potato storage facility. The facts were very interesting. (Well, sort of. I mean, everything is interesting if you are in quarantine.) These were special crisping potatoes which were sold to crisp manufacturers who had extremely exacting standards.

We are talking big potatoes here – like 28,000 tons a year – which need to be stored in a controlled environment, otherwise they only last a few weeks and become unsaleable. They will sprout and wilt, which is apparently a bad thing. There were lots more details, but I need to move on.

Legislation has overtaken some of the above decisions and, in particular, CAA 2001 now includes specific provision for expenditure on cold stores and on silos which provide for temporary storage. An important question was whether the potato storage facility could be described as a silo for this purpose. HMRC drew attention to the Oxford English Dictionary definition of silo and suggested that it meant:

1. ‘A pit or underground chamber used for storage of grain, roots etc.

2. A pit or air and water tight chamber in which green food is preserved for fodder for ensilage.’

(Why did this not apply to gas cavities? No, me neither)

The First-tier Tribunal held that the potato storage facility was both a silo and a cold store and therefore qualified as plant for capital allowance purposes.

This would obviously have been a welcome result for the company and although it gives some hope to other taxpayers, we are not really any further forward in determining how similar expenditure will be treated in the future. 


Issue: 1546
Categories: In brief