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HMRC v David Thomson

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In HMRC v David Thomson ([2014] UKUT 0360 – 13 August 2014), the UT found that a laundry managed by a Health Board was a ‘commercial building’ for the purpose of the initial industrial buildings allowance (IBA).

David Thomson was a member of a syndicate which funded the construction and fitting out of a building procured by Lanarkshire Primary Care NHS Trust for use as a laundry. The building is located within an enterprise zone and the expenditure would qualify for a 100% IBA if the building was used as a ‘commercial building’ (CAA 2001 s 271). ‘Commercial building’ means, inter alia, a building which is used for the purpose of a trade, profession or vocation (s 281).

The UT noted that there was no statutory definition of ‘trade’ and that most case law was concerned with whether a single transaction was in the nature of a trade, which was not directly relevant to the case. Certain observations could, however, be made from the case law; for instance, the absence of an intention to profit does not necessarily mean that there is no trade. Consequently, a public body like Lanarkshire – which carries out functions for which no charge is made at the point of delivery – could carry on a trade.

The UT found that Lanarkshire provided laundry services, a commonly provided service of a commercial nature, in consideration for payment by two other Health Boards. The facts that the charges were calculated solely to cover Lanarkshire’s costs, and that the laundry’s sole customers were public bodies, did not alter the analysis. The building in which the laundry was operated was a commercial building.

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Why it matters: The concept of trade remains as elusive as ever, particularly given that a transaction between public bodies without a view to profit can constitute a transaction in the nature of a trade.

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