Buckingham (HM Inspector of Taxes) v Securitas Properties Ltd
| Jurisdiction | Scotland |
| Judgment Date | 03 December 1979 |
| Date | 03 December 1979 |
| Court | Court of Session (Inner House - First Division) |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Corporation tax - Industrial building allowance - Security area of building - Storage and wage-packeting of cash - Whether subjection of goods to any process - Capital Allowances Act 1968, s 7.
The taxpayer Company incurred expenditure on the construction of a building which included a secure area occupied (by a lessee) for the purposes, inter alia, of storage and wage-packeting of large sums of cash. The Company, appealing against a corporation tax assessment for the period ending 31 December 1976, claimed that this activity was a subjection of goods to a process within the meaning of s 7(1)(e) of the Capital Allowances Act 1968 so that industrial building allowance was due. The Commissioners upheld the Company's contentions and determined the assessment in an agreed figure. The Crown appealed.
The Chancery Division, allowing the Crown's appeal and following Bourne v. Norwich Crematorium Ltd. 44 TC 164; [1967] 1 WLR 691, held that the phrase "the subjection of goods to any process" should be considered as a whole; that the words were to be read in their context and in that context the word "goods" was intended to bear its ordinary meaning of "merchandise" or "wares", and did not include coins or notes which were being dealt with as currency.
Stated by the Commissioners for the General Purposes of the Income Tax for the Division of Evesham in the County of Hereford and Worcester.
1. At a meeting of the said Commissioners held on 3 July 1978 Securitas Properties Ltd. ("the company") whose registered office is at Farncombe House, Broadway, Worcestershire, appealed against an assessment to corporation tax in the sum of £4,601.48 for the accounting period ending 31 December 1976.
2. Shortly stated, the question for our determination was whether a part (known as "the security area") of a building at Felling near Newcastle-upon-Tyne, which was leased by the company to Group 4 Total Security Ltd. ("Group 4") was an industrial building within the meaning of s 7 of the Capital Allowances Act 1968 so as to entitle the company to allowances under Ch I, Part I of that Act in respect of the capital expenditure incurred by them upon the construction of that part of the building.
3. The company was represented by Mr. Barry Pinson Q.C. and the Inspector was represented by Mr. Nicholas Jordan of the office of the Solicitor of Inland Revenue. Mr. John Anthony Sword, the divisional manager of Tyne and Wear Division of Group 4 gave evidence before us. The following documents were admitted before us: (a) a detailed plan of the security area (exhibit 1); (b) a leaflet entitled "Retail Security Services Group 4 Total Security" (exhibit 2). There was also produced before us an empty wage packet of the kind used in the trade in question (exhibit 3).
4. We also relied upon our inspection of the premises which we carried out on 29 June 1978 in company with the parties' representatives and advisers. We found that the security area comprised part of a purpose-built block (the remainder consisting of offices in respect of which no claim was made). Entry into the security area was through an external "air lock" entrance. Entry was controlled by means of closed circuit television from a control room. Once in, the air lock entrants to the building had to pass through a further two doors before entering the security area. The release mechanism on the doors was controlled from the control room. The security area comprised a wage-packeting area (with ancillary kitchen and toilets), a strong room or vault, a control room (with its own kitchen and toilets), a generator room, a room containing the main distribution frame for electronics and telephone equipment, a separate store-room for other technical equipment, together with a loading and unloading bay and a service bay for the armoured vehicles used in the trade. For security reasons, the security area has no windows and its own air supply.
5. Mr. Sword's evidence, which we accept, was as follows:-
(a) Three main activities took place in the security area: (i) wage-packeting, (ii) storage of money, some of which was and some was not being held for wagepacketing, (iii) the control room which was the communications centre for the whole division as well as guarding the security area.
(b) As to the wage-packeting, this was a service provided for a fee by Group 4 to employers. The employer supplied Group 4 with a cheque for the total payroll and individual payslips for each employee. Group 4 then presented the cheque at the bank and drew the money in the required breakdown which would have been notified to the bank by the employer. A bulk check would be carried out and the cash would then be sealed into containers and transported to the premises at Felling in a bullion vehicle. The contents of each container were subject to a limit by value, for insurance reasons.
(c) On the journey to Felling the vehicle would be in two-way radio communication with the control room. On arrival it would be admitted into the unloading bay (which was guarded by electrically operated shutters) by staff in the control room. The shutters would be closed and the cash would then be passed through a rotary hatch between the unloading bay and the wage-packeting area. Usually the money would then be stored in the vault under the supervision and control of the vault officer.
(d) When the time came to packet the money it would be taken from the vault by the vault officer and handed to the wage-packeting supervisor. The supervisor and her wage-packeters were all female; the latter were all part-time workers. The supervisor would count the money by bundles and then break it down by section for payroll analysis. Each section (i.e., corresponding to a section of employees) would then be put into an individual bag along with the relevant pay slips and given to one of the packeters.
(e) The packeter would then do an exact count and fill each wage-packet with the amount and the breakdown specified by the employer in question. When all the packets were filled, provided the balance was exactly right, the packets would be sealed. If the balance was not right, all the packets in that section would have to be emptied and refilled until it was. The packets were designed and sealed in such a way that the recipient could check the contents without breaking the seal. Care was taken to ensure that the notes in a wage-packet were not all of large denomination: e.g., a £60 wage-packet was not made up of three notes of £20 each; there would be a combination of £5 and £1 notes.
(f) The packets were then sealed in boxes in the correct sequence and returned to the vault pending distribution. Wage-packets were distributed in various ways, according to the employer's orders. Some were delivered in bulk to the employer; some were posted in greater or lesser bulk, Group 4 delivering them to the post office; some were distributed directly by Group 4.
(g) This pattern was sometimes varied to comply with the wishes of a particular customer. For example, some employers required deductions to be made from the wage-packets for advance wages, union dues and the like; some supplied their own wage-packets; some wanted circulars to their employees to be inserted into the packets. Sometimes there was a shortfall of cash delivered, or the cash included torn or defaced notes or foreign coins which were removed and replaced. A float of £50 was kept for such contingencies.
(h) About 10,000 wage-packets were handled each week, mostly between 8 p.m. on Wednesdays and 2 a.m. on Thursdays; and 8 a.m. to 6 p.m. on Thursdays. The packeters were trained by Group 4 and the skills required were numeracy and accuracy when counting at speed. A kitchen and toilets were provided because the staff were not allowed to leave the area until the packets were filled and the cash had balanced, for security reasons. The only machinery employed in this area was a coin-counting machine worth about £3,000-£4,000.
(i) Wage-packeting was a task which, if it were not contracted to Group 4, would in all probability be done by the employer's wages office, but no employer could match Group 4's security.
(j) The vault was also used for storing cash other than wages. This service was mostly used by customers such as supermarkets who required overnight storage followed by delivery to the bank in the morning. For every £1 stored for wage-packeting, about £11 were stored as a service in itself. So far as Group 4's profits were concerned, however, wage-packeting was a much more important activity than storage. The transporting of money was in turn much more important than wage-packeting.
(k) The control room had a number of functions. It controlled access to the security area of both vehicles and people. It was in permanent touch with, and monitored the movements of all cash-carrying vehicles within the division. It also received all alarm-calls from land-lines linked with Group 4 alarm systems in the division. At night it acted as the base for Group 4 patrols. It was permanently manned. Normally there would be little contact between the control room and the other parts of the security area, but the control room scrutinized the "air lock" entrance through closed-circuit television and a "bandit-proof" glass screen.
(l) The generator was provided for stand-by power to the security area only. The main distribution frame was maintained by the GPO. There was an alarm system connecting the control room directly with police headquarters. The structure of the building included sensor devices. The service bay catered for a fleet of 30 vehicles, Group 4 employing its own mechanic.
6. (a) It was common...
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