Girobank Plc v Clarke (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 04 March 1996 |
| Date | 04 March 1996 |
| Court | Chancery Division |
Chancery Division
Lindsay J.
Peter Whiteman QC (instructed by the litigation unit of Girobank) for Girobank.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
A-G v Aramayo TAX(1925) 9 TC 445
Buckingham (HMIT) v Securitas Properties Ltd TAX(1979) 53 TC 292
Ellerker (HMIT) v Union Cold Storage Co Ltd TAX(1938) 22 TC 195
Evans Medical Supplies Ltd v Moriarty (HMIT) TAX(1957) 37 TC 540
IR Commrs v Lambhill Ironworks Ltd TAX(1950) 31 TC 393
IR Commrs v Leith Harbour & Docks Commrs TAX(1941) 24 TC 118
Kilmarnock Equitable Co-operative Society Ltd v IR CommrsTAX(1966) 42 TC 675
Vibroplant Ltd v Holland TAX(HMIT) (1981) 54 TC 658
Capital Allowances - Industrial buildings allowance - Data processing centre used by bank - No administrative functions carried out at centre - Taxpayer claimed industrial building allowance - Whether centre was an industrial building qualifying for a capital allowance - Whether centre was an office not qualifying for a capital allowance - Capital Allowances Act 1990 section 18 subsec-or-para (1) section 18 subsec-or-para (4)Capital Allowances Act 1990, ss. 18(1)(e), 18(4).
This was an appeal by Girobank plc, the taxpayer, against the decision of a deputy special commissioner that a centre used for the processing of cheques and other papers was not an industrial building or structure within the scope of the Capital Allowances Act 1990 section 18 subsec-or-para (1)Capital Allowances Act 1990, s. 18(1)(e) and therefore did not qualify for an industrial building allowance.
Girobank provided a large range of banking services to corporate and individual customers through Post Office Counters Ltd which acted as agents for Girobank. In order to record the transactions made each day, Girobank had developed a highly organised system for the prompt daily delivery to it, from the post offices, of the paperwork created and a highly mechanised method of quickly processing it at the centre.
The centre consisted of a single-storey building of modular construction. It contained 64,500 square feet of open plan operational processing space and was exclusively used as a paper processing centre. At the centre the information about the various debits and credits to be made, contained in the documents received, were converted into information on magnetic tape which was then sent down a telephone. All the cheques that were received for clearing were sorted into separate groups for prompt forwarding to the various clearing banks. There were a large number of special purpose machines which achieved the above processes. None of Girobank's administrative functions were carried out at the centre.
Girobank claimed an industrial building allowance for the centre underCapital Allowances Act 1990 section 18 subsec-or-para (1)s. 18(1)(e) of the Act. The Revenue rejected the claim on the grounds that the centre was in use as an office within the terms ofCapital Allowances Act 1990 section 18 subsec-or-para (4)s. 18(4) and therefore was not entitled to an industrial building allowance. Girobank appealed against its corporation tax assessment for the accounting period ending 31 December 1991. The commissioner held that it was not an industrial building or structure within the scope of Capital Allowances Act 1990 section 18 subsec-or-para (1)s. 18(1)(e) because the process carried out at the centre did not involve the subjection of any "goods or materials to any process" as required by the section. The commissioner also held that it was not an office within the terms of Capital Allowances Act 1990 section 18 subsec-or-para (4)s. 18(4) of the Act.
Held, dismissing the appeal:
1. The phrase "any process" was not limited to a process of an industrial character or a process which altered the goods and materials in any way. Therefore the commissioner was wrong to have held that for a process to come within the scope of the section it had to be at least akin to manufacture.
2. The commissioner was wrong to have held that the papers subjected to the process did not amount to "goods" within the scope of the section. That definition was not consistent with either Capital Allowances Act 1990 section 18 subsec-or-para (3)s. 18(3) of the Act or the dictionary meaning of the term goods. Therefore the centre came within the definition of Capital Allowances Act 1990 section 18 subsec-or-para (1)s. 18(1)(e) of the Act.
3. However, the word "office" could be given its ordinary meaning. There was ample material within the facts found by the commissioner to support a finding that the centre was an office. Therefore by virtue ofCapital Allowances Act 1990 section 18 subsec-or-para (4)s. 18(4) of the Act the centre was excluded from the scope of Capital Allowances Act 1990 section 18 subsec-or-para (1)s. 18(1) and Girobank was not entitled to an industrial building allowance.
The taxpayer, Girobank plc, appealed by way of case stated under theTaxes Management Act 1970 section 56Taxes Management Act 1970, s. 56 from a decision of a special commissioner (Mr Malcolm JF Palmer) released on 6 July 1994.
The question of law for the opinion of the High Court, as stated by the commissioner, was whether he had erred in law in holding that the Wigan Centre was not an industrial building for the purposes of theCapital Allowances Act 1990 section 18 subsec-or-para (1)Capital Allowances Act 1990, s. 18(1)(e).
This is an appeal by Girobank plc ("Girobank") against a corporation tax assessment for the accounting period ended 31 December 1991. I am not asked to make any decision on figures. The sole issue for me is whether in principle the premises constituting the document and data processing centre at the Quayside, Westwood Park, Wigan (the "Wigan Centre") are an industrial building or structure for the purposes of Capital Allowances Act 1990 section 18s. 18 of the Capital Allowances Act 1990. The appeal accordingly raises the issue as to whether a building used with modern technology and mechanisation as a document and data processing centre can be treated as a building in use for the purposes of a trade which consists in the subjection of any goods or materials to any process for the purposes of industrial building allowances.
I was supplied with a brief statement of facts not in dispute with 13 numbered paragraphs. I adopt this to the extent that these facts are not repeated or amplified in my finding of facts that follows. This statement of facts refers to some of some 21 documents, or categories of documents, that are contained and indexed in a folder handed up to me at the hearing. Additionally I was handed up a copy of a guide to Girobank services (document 23), a copy of a leaflet describing a service known as "Transcash" (document 22) and copies of a lease and lease-back of the Wigan Centre dated 27 September 1991 (document 24). Evidence was given at the hearing by Mrs Cameron who is the manager, Wigan Operations, Girobank and the senior manager of Girobank at the Wigan Centre. As part of her evidence she conducted me, in the presence of the representatives of the parties, on a visit to the centre and inspection of many of the activities carried on there. Evidence was also given by Mr Bob Cartwright who is employed as the taxation accountant of Girobank and by Mr William C Arthur who is a business operations director of the Inland Revenue employed at Bush House.
Girobank, which is a subsidiary of Alliance & Leicester Building Society, is an authorised bank for the purposes of the Banking Act 1987. It provides a wide range of banking services to corporate and individual customers. Like many successful businesses it has its own particular way of carrying out much of its business. One particular facet of the way Girobank carries out its business is that it does not have its own branch network. Instead of its own branches it has an agreement with Post Office Counters Ltd (which I shall refer to as "POCL"). Under that agreement POCL acts as the agent for Girobank for the receipt of cash, cheques and other deposits from its own customers and for cash drawings. This is a continuation of the original relationship when Girobank was part of the Post Office. As a result of this link with POCL, Girobank has an agency network throughout the country of over 1000 main Crown post offices and 19,000 local sub post offices.
This link with POCL has a particularly useful synergy for the business of Girobank and its "Transcash" paying in and cash transmission service. That synergy arises because these numerous post offices throughout the country both need cash to pay out weekly pension and other social security benefits and provide numerous widespread accessible points for the deposit of cash. With its link with POCL and its Transcash service Girobank can therefore offer the ability to transfer promptly the credits arising from the deposit of cash at widespread points throughout the country without needing to transfer similar quantities of actual cash. This service is particularly useful to retailers such as supermarkets who are large collectors of daily cash and who want to have those cash funds converted as soon as possible into available bank balances. It is also particularly useful to suppliers, such as utility companies, and to local authorities who need to receive regular deposits of cash from small individual customers who may not have their own bank accounts. When customers wish to use this paying in service they will take a paying in voucher to POCL with the cash or cheques or other items to be deposited. Girobank will charge a fee for this service which may be paid by the payer, the payee or both depending upon the terms of the customer's agreement with Girobank. POCL will also be entitled to a fee from Girobank under the terms of...
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