Dixon (HM Inspector of Taxes) v Fitch's Garage Ltd

JurisdictionEngland & Wales
Judgment Date19 June 1975
Date19 June 1975
CourtChancery Division

HIGH COURT OF JUSTICE (CHANCERY DIVISION)-

(1) Dixon (H.M. Inspector of Taxes)
and
Fitch's Garage Ltd

Corporation tax, Schedule D - Capital allowances - Machinery and plant - Canopy over petrol filling station - Whether setting of business or apparatus with which it was carried on - Functional test - Finance Act 1971 (c. 68), s. 41.

The Respondent Company redeveloped the forecourt of its garage premises by providing new self-service pumps and storage tanks, and an office with a computer console, and by erecting a new canopy over the whole service area to provide adequate lighting and protection from the weather for the pumps, employees and customers. The canopy, which was designed and built to the Respondent's requirements, was sectionalised and further sections could be added. It consisted of an aluminium roof with fascia and cladding supported on four steel columns. The steel columns were bolted to sunken concrete bases which were embedded in concrete islands. The tops of the pillars were fitted to a steel frame by nuts and bolts. The only equipment mounted on the canopy was for lighting.

The Inspector of Taxes refused capital allowances on the cost of the canopy. On appeal, the Company contended that the canopy formed an integral part of the petrol pump complex and was therefore plant employed in the business. For the Crown it was contended that the canopy was the setting or part of the setting in which the business was carried on rather than the apparatus with which it was carried on. The General Commissioners accepted the Company's contention and allowed the appeal.

Held, that the canopy did not have a functional purpose to enable the Company to perform the activity of supplying petrol to motor vehicles; it was merely part of the setting where petrol was supplied. It merely provided shelter and played no part in "the commercial process".

Functional test as expounded by a majority of the House of Lords inCommissioners of Inland Revenue v. Barclay, Curle & Co. Ltd.45 T.C. 221; [1969] 1 W.L.R. 675 explained and applied.

CASE

Stated by the General Commissioners of Income Tax for the Amersham Division in the County of Buckingham.

1. On 25th July 1973 the Appellant (hereinafter called "the Inspector") refused a claim by the Respondent (hereinafter called "the Company") under s. 177(1) of the Income & Corporation Taxes Act 1970 to carry forward trading losses at 31st October 1971 to the extent of £3,311. This sum represented first year allowances claimed under ss. 41 and 42 of the Finance Act 1971 in respect of expenditure on new plant at the garage in Amersham Road, Chesham. The Company appealed to the Commissioners against this decision under s. 42(3), Taxes Management Act 1970.

2. We heard the appeal on 9th October 1973 when evidence was given by Mr. D. Fox, a representative of the firm which had erected the canopy (to which this case relates) for the Company in 1971.

3. We found the following facts admitted or proved:

  1. (a) The Company was incorporated on 26th October 1961 and the garage premises in Amersham Road, Chesham were leased by the freeholder, Mrs. J. Fitch, to the Company.

  2. (b) The Company had installed and owned all plant fixtures and fittings on the site.

  3. (c) When a garage opposite the site of the Company's garage had changed to self-service pumps and had erected a canopy over their pumps the Company decided to do likewise.

  4. (d) This work was carried out during the year ended 31st October 1971 at a total cost of £20,959. In consequence of this the Company's sales had increased.

  5. (e) The changeover involved a complete redevelopment of the forecourt including the provision of new pumps and storage tanks, an office with a computer console and the erection of a canopy to provide adequate lighting and protection from the weather of the pumps and customers.

  6. (f) Photographs (exhibits A and B) of the garage premises showing the canopy and pumps before and after the redevelopment and a map (exhibit C) showing the layout of the site were submitted to the Commissioners.

  7. (g) In 1966 the Company had purchased and erected the original canopy which, as appears from the photograph, was just large enough to cover the pumps themselves, at a cost of £851 and the Inspector had then accepted the Company's claim for capital allowances on this amount.

  8. (h) In relation to the expenditure on the premises in the year ended 31st October 1971 the Inspector was prepared to allow capital allowances of £599 on the cost of self-service pumps and £390 on the cost of electric lighting attached to the canopy, but refused first year allowance of £3,311 on the cost of the canopy itself.

  9. (i) The canopy was designed and built to the Company's requirements to cover the whole service area and provide shelter against the elements for the pumps, employees and customers, also to accommodate adequate lighting for the service area. The lighting was the only equipment mounted on the canopy.

  10. (j) The canopy was sectionalised and further sections could be added if required at any time in the future. It consisted of an aluminium roof, with fascia and cladding, supported on four steel colums. The steel columns were bolted to sunken concrete bases which were embedded in concrete islands. The tops of the pillars were fitted to a steel frame by nuts and bolts.

  11. (k) Planning permission had been required and was granted before its erection.

  12. (l) The canopy was a design which had been in use only two years but it had been attributed by some local authorities an average life of approximately ten years; in the witness's opinion they could last and be in use for longer than this. The specialist company which erected the canopy had erected...

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