Bradley (Inspector of Taxes) v London Electricity Plc
| Jurisdiction | England & Wales |
| Judgment Date | 24 July 1996 |
| Date | 24 July 1996 |
| Court | Chancery Division |
Chancery Division
Before Mr Justice Blackburne
Corporation tax - capital allowance - substation not 'plant'
Expenditure incurred by London Electricity plc on the structure of an underground substation in Leicester Square for transforming electricity did not qualify for allowances under section 24 of the Capital Allowances Act 1990, previously section 44 of the Finance Act 1971.
A distinction had to be made between the expenditure on the earthing system and equipment installed within the structure, that qualified for the allowances, and that incurred on the construction of the substation itself that formed the premises from which the trade was carried on and thus did not qualify.
Mr Justice Blackburne so held in a reserved judgment in the Chancery Division when allowing an appeal by the Crown from a determination of a special commissioner (Mr D A Shirley) in November 1994 that had upheld in principle London Electricity's claim to capital allowances in respect of the entirety of its expenditure on the provision of the substation.
Mr Michael Furness for the Crown; Mr Peter Whiteman, QC, for London Electricity.
MR JUSTICE BLACKBURNE said that interred two metres below the paved surface of Leicester Square was the substation. It was a considerable structure: 12 metres high, 43 metres from east to west and 18 metres from north to south. Electricity passed into it via 132,000 volt cables where it was transformed by three transformers into 11,000 volts. It then passed out of the substation by means of 11,000 volt cables to join the network serving central London.
The appeal raised again the question whether a building or structure was plant for the purposes of the legislation relating to capital allowances. The expenditure disallowed by the Crown was that on works preparatory to the construction of the substation, including the excavation of the site, and that on the construction of the substation.
London Electricity's primary contention, accepted by the commissioner, was that the whole of the substation, that is, the structure and the equipment within, was a single functioning entity and as such was a single unit of plant for capital allowances purposes.
The Crown, while accepting that the structure and the equipment housed within it were designed together, contended that the structure of the substation should be viewed as a single structure or building, separate...
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