Bridge House (Reigate Hill) Ltd (Appellant) Robert Ernest Hinder (H. M. Inspector of Taxes) (Respondent)
| Jurisdiction | England & Wales |
| Judge | THE MASTER of THE ROLLS,LORD JUSTICE SALMON,LORD JUSTICE STAMP |
| Judgment Date | 04 May 1971 |
| Judgment citation (vLex) | [1971] EWCA Civ J0504-1 |
| Date | 04 May 1971 |
| Court | Court of Appeal (Civil Division) |
[1971] EWCA Civ J0504-1
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls (Lord Denning),
Lord Justice Salmon and
Lord Justice Stamp
Mr. MARCUS JONES (Instructed by Messrs. Partridge, Moss & Co.) appeared on behalf of the Appellant.
Mr. RAYMOND PHILLIPS, Q. C., and Mr. PATRICK MEDD (instructed by The Solicitor of Inland Revenue) appeared on behalf of the Respondent.
Bridge House (Reigate Hill) Ltd. carry on the business of caterers. They have a licensed restaurant called The Bridge House at Reigate Hill. Up to 1964 they had their own cesspool or septic tank to take away their sewage. It was on their own premises. In 1964 the Reigate Corporation the sewage authority - proposed to extend the public sewer for 650 yards - nearly half a mile - up Reigate Hill so as to provide public sewers for the people there. The Reigate Corporation came to agreements with those who would use the sewer. In particular they came to an agreement with The Bridge House (Reigate Hill) Ltd. whereby the company contributed a sum of £2,844. 6s.7d. towards the cost of the extension of the public sewer. The company now claim that, by reason of that capital expenditure, they were entitled to an initial allowance and also annual allowances.
The statutory provisions on the point are very complicated, but I will try to summarise them.
An initial allowance and annual allowances are made "where a person carrying on a trade incurs capital expenditure on the provision of plant or machinery for the purposes of the trade", see sections 279 and 280 of the Income Tax Act, 1952. Those sections apply only to the person who himself provides the plant or machinery. They do not apply where one person provides it and another person makes a contribution towards the expenditure.
The position of the contributor is, however, covered by section 332(3) of the 1952 Act. It provides that when a person, for the purposes of his trade, contributes a capital sum to expenditure by another person on the provision of an asset (being expenditure which, if made wholly by that other person, would have qualified for the allowances), then the contributor gets such initial and annual allowances as would have been made to him if he had himself expended it on providing a similar asset for the purposes of his trade.
Thus far so good. But the trouble in this case was that the expenditure by the Reigate Corporation was not made for the purposes of a trade. It was made in order to provide an extension to the sewage system, which is not a trade. It would not have qualified in their hands for the allowances.
This omission was made good by section 40 of the Finance Act, 1963:
"(1) Where a sewerage authority in the United Kingdom incurs expenditure on the provision of an asset to be used in the treatment of trade effluents, then, in relation to any contribution of a capital sum to that expenditure" section 332(3) shall apply as if the asset were to be used "for the purposes of a trade carried on by the sewerage authority."
The long and short of it is that the sewerage authority are to be treated as if they were carrying on a trade: and as if they provided this asset for the purposes of the trades and the company are to be regarded as contributing a capital sum towards it. On that basis the company are entitled to initial and annual allowances in respect of that expenditure, provided that these two conditions are satisfied:
First: The asset is "to be used in the treatment of trade effluents".
Second: The asset is "plant or machinery" for which the company would have been entitled to allowances if it had itself provided a similar asset for the purposes of its trade.
The company has failed so far. The Commissioners held that the sewage pipes forming the extension were not "plant or machinery". The Judge held that the extension was not "to be used for the treatment of trade effluents". The company appeals to this Court.
"Trade effluents" are defined in section 40(2) of the Finance Act, 1963. It means "liquid or other matter discharged into public sewers from premises occupied for the purposes of trade".
The waste matter which comes from the company's restaurant is clearly "trade effluent": but were these sewage pipes "to be used for the treatment of trade effluents"? At first I was inclined to think they were. I thought that "treatment" was used in a wide sense. But Mr. Phillips has convinced me that "treatment is used in a narrow sense. It applies only to thepurifying of the effluent, the elimination of noxious matter, and so forth. It does not apply to the carriage of effluent along the pipes to the sewage works. Mr. Phillips has taken us through a series of Acts in which "treatment" is used in the strict sense of treatment, i. e., actually treating the matter by purifying it, and so forth. In particular he referred us to the Public Health Act, 1936, the Public Health (Drainage of Trade Premises) Act, 1937; and the Public Health Act, 1961.
This meaning of "treatment" means that the only contributions which qualify for allowances are contributions to expenditure such as these:- A trading estate may be so large as to require a purifying plant for the estate: or It may entail the extension of the purifying plant at the sewage works. Sometimes a particular trade may pour out a particularly noxious effluent which needs special plant at the works. And so forth. Contributions to such expenditure qualify for allowances. But...
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