Attwood (Inspector of Taxes) v Anduff Car Wash Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 17 July 1997 |
| Date | 17 July 1997 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Beldam, Peter Gibson and Waller LJJ.
Peter Whiteman QC and Brian Green (instructed by Denton Hall) for the taxpayer.
James Munby QC and Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Benson (HMIT) v Yard Arm Club Ltd TAX(1979) 53 TC 67
Carr (HMIT) v Sayer TAXTAX(1992) 65 TC 15; [1992] BTC 286
Commr of Inland Revenue v Waitaki International Ltd [1990] 3 NZLR 27
Cole Bros Ltd v Phillips (HMIT) TAXTAX(1981) 55 TC 188; [1982] BTC 208
Cooke v Beach Station Caravans Ltd WLR[1974] 1 WLR 1398
Edwards (HMIT) v Bairstow ELR[1956] AC 14
Gray (HMIT) v Seymours Garden Centre (Horticulture) TAXTAX(1995) 67 TC 401; [1995] BTC 320
IR Commrs v Barclay, Curle & Co Ltd WLR[1967] 1 WLR 675
IR Commrs v Scottish & Newcastle Breweries Ltd WLRTAX[1982] 1 WLR 322; [1982] BTC 187
Jarrold (HMIT) v John Good & Sons WLR[1963] 1 WLR 214
Mitchell Construction Co Ltd v Secretary of State for EmploymentUNK(1972) 7 ITR 24
O'Srianian v Lakeview Ltd (1984) ITC No. 125
Schofield (HMIT) v R & H Hall Ltd TAX(1974) 49 TC 538
Wangaratta Woollen Mills Ltd v Commr of Taxation UNK(1969) 119 CLR 1
Wimpy International Ltd v Warland (HMIT) TAXTAXTAX(1989) 61 TC 51; [1987] BTC 591; [1989] BTC 58 (CA)
Corporation tax - Capital allowances - Site incorporated buildings housing car wash installation - Whether whole site to be regarded as "plant" with which the car wash trade was carried on attracting capital allowances or whether site and buildings were excluded as premises in which the trade was carried on - Capital Allowances Act 1990 section 22 section 24Capital Allowances Act 1990, ss. 22, 24.
This was an appeal against the decision of Carnwath J ([1996] BTC 44) allowing an appeal by the Revenue from a decision of the special commissioners that an entire site on which stood a structure constructed to a special design for the efficient operation of a car wash was to be regarded as a single item of plant for the purposes of claiming capital allowances under the Capital Allowances Act 1990 section 22 section 24Capital Allowances Act 1990, ss. 22 and 24.
The taxpayer operated 78 car wash sites throughout the UK. On each site was a "wash hall" incorporating the car wash machinery and control equipment. There were surrounding paved and tarmac areas for access and departure where facilities for vacuuming the inside of cars were provided.
The roof of the building was shaped to catch rain water for use in the car wash; the walls were waterproofed inside and out; and heating was provided so that the car wash could function even in the coldest weather.
The sites were laid out in accordance with a system which allowed four cars to pass through the wash hall at the same time on a continuous conveyor belt.
The Revenue refused to accept that either the whole of the car wash site or the structure itself constituted a single item of "plant", in respect of which capital allowances were available on the ground that the car wash site and building were the premises where the business was carried on as opposed to plant with which it was carried on.
Held, dismissing the taxpayer's appeal:
1. In order to be regarded as plant, it had not only to be shown that the item in question was used for carrying on the business, but it also had to be shown that the item was not the premises in which the business was carried on. The entire site, the part over which cars were driven to and from the wash hall, or were parked while the interiors were vacuumed, functioned as premises, passing only the business use test. It could not be said that the whole site constituted plant.
2. The wash hall itself merely housed the car wash machinery and the building could not be regarded as plant because of the incorporation of features such as the special roof for collection of rain water and interior waterproofing for conservation and recycling water.
3. While the question whether a structure could be regarded as plant was a matter of fact for the special commissioners, it could not reasonably have been said that either the entire car wash site or the building functioned as plant. The site and the structure functioned as premises, housing the machinery. It was the place where the car wash business was carried on.
Wimpy International Ltd v Warland (HMIT) TAX[1987] BTC 591; [1989] BTC 58 (CA) applied.
Peter Gibson LJ: Yet again this court is called upon to revisit the question whether an asset, on the provision of which a person carrying on a trade has incurred capital expenditure for the purposes of the trade and which belongs to him at some time during the chargeable period related to the incurring of the expenditure, is "plant" so as to entitle the trader to capital allowances against corporation tax. The assets in question are automatic car wash sites, including the buildings and equipment for operating car washes. The primary contention of the taxpayer, Anduff Car Wash Ltd ("Anduff"), has been and is that each site constitutes a single unit of plant. The Revenue accepts that 19 of the 48 component parts of the car wash facilities qualify as plant, but claims that nothing else so qualifies. Seven assessments to corporation tax were raised in respect of accounting periods ended 31 December 1984-1990 inclusive. Anduff appealed and on 17 May 1993 the special commissioners decided in principle that subject to minor exceptions the sites were single units of plant. The Revenue appealed and on 1 December 1995 Carnwath J allowed the appeal and remitted the matter to the commissioners to determine the appeals against the assessments in accordance with his judgment. Anduff now appeals from that order.
The report of the judgment of the judge at [1996] BTC 44 includes the decision of the commissioners. It is therefore unnecessary to do more than summarise the salient facts which they found.
(2) Anduff in the periods in question acquired 78 sites throughout the UK and installed car washing facilities thereon.
(3) Anduff, whose only trade is that of operating car washes, uses the IMO car wash system, which was designed and developed in Germany.
(4) Each site is approximately 50m by 23m.
(5) The washing of the cars is carried out in a building called the wash hall, which is approximately 20m long by 6.5m wide, which contains the car washing equipment and through which the cars are pulled mechanically. There the cars are washed, dried, and, if the customer chooses, the underneath of the car is washed and the car is wax-polished.
(6) On one side of the building are a control room, lobby, staff WC, pump room, an open area containing the inspection covers for water tanks and a store.
(7) The control room contains the electric meters and switch gear, alarm system and control panel, which houses the electrical equipment constituting the "brains" of the IMO system, and a limited amount of furniture for the operator.
(8) Recycled water, collected in part from rain which falls onto the site and onto the wash hall roof, V-shaped for collecting rain, is used in the car washing process, only the final rinsing normally being done with fresh water.
(9) The reinforced base of the wash hall incorporates water tanks, ducts for drainage, for water circulation and for electricity and accommodates bases for the steel supports for the roof and for the first horizontal brush.
(10) The materials used for the wash hall are designed to enable the car wash operation to be conducted efficiently: the windows are waterproofed externally and internally, the walls are of a single skin dense engineering brick construction without damp proof coursing (save for the outer walls of the control room, lobby and WC) and the interior is waterproofed by means of tiling and rubberised wall finishes to confine the water used in the car washing within the wash hall.
(11) The roof and walls also serve to retain noise and exclude frost, and heating is provided in the wash hall so that car washing is available even in the coldest weather.
(12) Outside the wash hall there are bays where two or three coin-operated vacuum units, connected electrically through ducts to the control panel in the control room enable customers to vacuum the inside of their cars.
(13) In front of the entrance to the wash hall there is a brick paviour area, the bricks being laid on a bed of sand, and there the site operator prewashes the car with a high-pressure hose. A smaller level area of brick paviours is to be found outside the exit from the wash hall.
(14) Most of the site is covered in tarmacadam or similar material and laid out with signs and bollards. Other parts of the site are pavement cross-overs, concrete kerbs marking the edge of the site surface, fencing and landscaping.
Two findings made by the commissioners are particularly relied on by Anduff. The first is this:
The IMO system encompasses not only the machinery inside the wash hall which carries out the actual washing operation but the whole concept and design of each car wash site to ensure that the maximum number of cars can be processed efficiently and safely in the shortest possible time. Anduff car wash sites can clean up to 90 cars per hour, whereas the capacity of a normal roll over car wash plant is between eight and ten cars per hour. The wash hall to be found on each Anduff site can accommodate four cars at any one time.
The second, taken from the evidence of Anduff's construction manager, Mr Moorman, is this:
Layout of the site is...
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