Commissioners Of Inland Revenue V. Anchor International Limited
| Jurisdiction | Scotland |
| Judge | Lord Kirkwood,Lord MacLean,Lord Osborne |
| Date | 22 October 2004 |
| Docket Number | XA29/03 |
| Court | Court of Session |
| Published date | 22 October 2004 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Kirkwood Lord MacLean Lord Osborne
| XA29/03 OPINION OF THE COURT delivered by LORD KIRKWOOD in APPEAL TO THE COURT OF SESSION as THE COURT OF EXCHEQUER IN SCOTLAND under Section 56A(1) of the Taxes Management Act 1970 from a decision of the Special Commissioners of Income Tax dated 30 January 2003 and communicated to the appellants on 30 January 2003 by THE COMMISSIONERS OF INLAND REVENUE Appellants; against ANCHOR INTERNATIONAL LIMITED Respondents; _______ |
Act: Hodge, Q.C., Paterson; Solicitor for Inland Revenue (Appellants)
Alt: Ghosh; Dundas & Wilson (Respondents)
22 October 2004
[1]This is an appeal by the Commissioners of Inland Revenue against a decision of the Special Commissioner allowing an appeal by Anchor International Limited (the respondents) against assessments to corporation tax for the accounting periods ending 30 April 1995 to 30 April 1998. The issue is whether capital expenditure incurred by the respondents in respect of the construction of five-a-side football pitches on the excavation, in-filling, draining, terram and synthetic grass was expenditure on the provision of plant and machinery for capital allowance purposes. It was agreed that the expenditure was capital and that it was incurred wholly and exclusively for the purposes of the trade.
[2]Section 24(1) of the Capital Allowances Act 1990 provided that -
"(1)Subject to the provisions of this Part, where -
(a)a person carrying on a trade has incurred capital expenditure on the provision of machinery or plant wholly and exclusively for the purposes of the trade, and
(b)in consequence of his incurring that expenditure, the machinery or plant belongs or has belonged to him,
allowances and charges shall be made to and on him in accordance with the following provisions of this section."
[3]The main contention of the appellants was that the expenditure was excluded from capital allowances for plant and machinery by Schedule AA1, which was introduced by the Finance Act 1994. Paragraph 2 of that Schedule provided inter alia as follows:
"2.-(1) For the purposes of this Act expenditure on the provision of machinery or plant does not include any expenditure on-
(a)the provision of structures or other assets to which this
paragraph applies, or
(b)any works involving the alteration of land.
(2)This paragraph applies to any structure or other asset which falls within column 1 of the following Table ('Table2').
(3)Sub-paragraph (1) above does not affect the question whether-
(a)any expenditure falling within column 2 or Table 2, or
(b)any expenditure on the provision of any asset of a description
within any of the items in column 2 of Table 1,
is for the purposes of this Act expenditure on the provision of machinery or plant ... ".
[4]Table 2 of Schedule AA1 was in the following terms:
| " (1) Structures and assets A Any tunnel, bridge, viaduct, aqueduct, embankment or cutting B Any way or hard standing, such as a pavement, road, railway or tramway, a park for vehicles or containers, or an airstrip or runway. C Any inland navigation, including a canal or basin or a navigable river. D Any dam, reservoir or barrage (including any sluices, gates, generators and other equipment associated with it). E Any dock. F Any dike, sea wall, weir or drainage ditch. G Any structure not within any other item in this column. | (2) Expenditure which is unaffected by the Schedule 1 Expenditure on the alteration of land for the purpose only of installing machinery or plant. 2 Expenditure on the provision of dry docks. 3 Expenditure on the provision of any jetty or similar structure provided mainly to carry machinery or plan. 4 Expenditure on the provision of pipelines, or underground ducts or tunnels with a primary purpose of carrying utility conduits. 5 Expenditure on the provision of towers provided to support floodlights. 6 Expenditure on the provision of any reservoir incorporated into a water treatment works or on the provision of any service reservoir of treated water for supply within any housing estate or other particular locality. 7 Expenditure on the provision of silos provided for temporary storage or on the provision of storage tanks. 8 Expenditure on the provision of slurry pits or silage clamps. 9 Expenditure on the provision of fish tanks or fish ponds. 10 Expenditure on the provision of rails, sleepers and ballast for a railway or tramway. 11 Expenditure on the provision of structures and other assets for providing the setting for any ride at an amusement park or exhibition. 12 Expenditure on the provision of fixed zoo cages." |
[5]Paragraph 5 provides that "'structure' means a fixed structure of any kind, other than a building".
[6]At the hearing before the Special Commissioner the parties lodged an agreed Statement of Facts in the following terms:
"The Appellant and the nature of the trade
(1)The appellant company is Anchor International Limited ('the Appellant'). The Appellant was incorporated in Scotland in February 1987 with company registration number SC103260. The Company commenced trading on 15 June 1988.
(2)The Appellant was established with widely drawn objectives which are described in the Memorandum of Association. Since the commencement of trading the actual trading activity carried on by the Appellant assessable to corporation tax under Schedule D Case I has comprised the provision of leisure facilities at various sites throughout the UK. As at 30 April 1998 the Appellant provided both outdoor and indoor leisure facilities at five sites in Scotland and four sites in England.
(3)As at 30 April 1998 the outdoor facilities comprised between 8 and 12 pitches specifically designed for five-a-side football matches. There was also a clubhouse building on each site providing all or a combination of indoor facilities, including shower and changing rooms, snooker and pool tables, coin-operated gaming machines, function rooms and bars. These facilities are available to persons using the pitches.
(4)In view of the popularity of the football facilities the Appellant operates an advance booking system for the five-a-side pitches. Block bookings are made by clubs which form together and play each other on pre-arranged dates as part of regular five-a-side football leagues. Clubs enter into formal block booking agreements for a series of at least 10 bookings. Under these agreements the Appellant reserves pitches for the relevant dates and times and the club undertakes to pay the appropriate charges for the use of the pitches on each occasion during the booking period.
(5) ...
The nature of each five-a-side football pitch
(6)At all the sites operated by the Appellant the game of five-a-side football involves the use of rebound boards on all four sides. Hard nets are mounted along the top of these boards behind each set of goals. Wire mesh fencing is mounted along the top of these boards at both ends of the outside perimeter of the pitches. Soft nets are hung above the rebound boards at the sides between individual pitches and are also hung above the hard nets and the wire mesh fencing. In addition each pitch has separately dedicated floodlights.
(7)In order that the pitches might be used for 364 days each year the Appellant provides a playing surface of a sand-filled synthetic grass 'carpet'. This synthetic grass carpet is laid on top of a semi-permeable terram which overlays a loose stone drainage system. This playing surface provides good bounce and also both spring and slide for the players. The synthetic grass carpet is laid in strips which can be lifted by a specialist contractor and replaced when they become worn out.
(8)The standard dimensions of each five-a-side football pitch are approximately 32.1m x 23.1m.
The capital expenditure
(9)It is agreed that the cost of construction of the clubhouse building is not eligible for capital allowances.
(10)It is also agreed that the cost of the land underlying the five-a-side pitches is not eligible for capital allowances.
(11)The capital expenditure on the construction of the actual five-a-side pitches has been analysed into separately identified elements as shown in Appendix A. This analysis relates to the expenditure at Sighthill, Edinburgh. The Sighthill premises were largely constructed during the accounting periods ended 30 April 1996 and 1997. It is believed that the Sighthill premises are broadly typical of the locations constructed by the Appellant in the four accounting periods to 30 April 1998. It is further agreed that the decision of the Special Commissioners in relation to the capital expenditure at Sighthill, as referred to in paragraph 4(12) will be applied to any identical capital expenditure incurred by the Appellant at other locations during the four accounting periods through to 30 April 1998. The decision of the Special Commissioners, subject to any appeal, will also be applicable to any identical capital expenditure incurred by the Appellant in subsequent accounting periods, provided that there is no material change in the law as regards such capital expenditure.
(12)The first category of expenditure relates to the football pitches. The Inspector of Taxes agreed claims for capital allowances in respect of similar expenditure for periods up to 30 April 1994. A subsequent Inspector of Taxes formed a different view on the application of the law for later periods. It is the view of the Inland Revenue that the original decision to grant allowances was incorrect but that it is precluded from re-opening the assessments for those periods by virtue of the decision in Scorer v. Olin Energy Systems Ltd [58 TC 592].
(13)It is agreed that the second category of expenditure comprising the goal posts, rebound boards and floodlights is all expenditure on the provision of plant which is eligible for capital allowances.
Description of qualifying expenditure under appeal
Preliminary and investigative works
(14)In...
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