HM Inspector of Taxes (Atwood) v Anduff Car Wash Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PETER GIBSON,LORD JUSTICE WALLER,LORD JUSTICE BELDAM |
| Judgment Date | 17 July 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0717-3 |
| Date | 17 July 1997 |
| Docket Number | CHRVF 96/0318/B |
| Court | Court of Appeal (Civil Division) |
[1997] EWCA Civ J0717-3
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE CARNWATH)
Royal Courts of Justice
Strand
London W2A 2LL
Lord Justice Beldam
Lord Justice Peter Gibson
Lord Justice Waller
CHRVF 96/0318/B
MR PETER WHITEMAN QC and MR BRIAN GREEN QC (instructed by Messrs Denton Hall, London EC4A 1BU) appeared on behalf of the Appellant.
MR JAMES MUNBY QC and MR TIMOTHY BRENNAN (instructed by the solicitor of the Inland Revenue) appeared on behalf of the Respondent.
Yet again this court is called upon to revisit the question whether an asset, on the provision of which a person carrying on a trade has incurred capital expenditure for the purposes of the trade and which belongs to him at some time during the chargeable period related to the incurring of the expenditure, is "plant" so as to entitle the trader to capital allowances against corporation tax. The assets in question are automatic car wash sites, including the buildings and equipment for operating car washes. The primary contention of the taxpayer, Anduff Car Wash Ltd. ("Anduff"), has been and is that each site constitutes a single unit of plant. The Revenue accepts that 19 of the 48 component parts of the car wash facilities qualify as plant, but claims that nothing else so qualifies. 7 assessments to corporation tax were raised in respect of accounting periods ended 31 December 1984 to 1990 inclusive. Anduff appealed and on 17 May 1993 the Special Commissioners decided in principle that subject to minor exceptions the sites were single units of plant. The Revenue appealed and on 1 December 1995 Carnwath J. allowed the appeal and remitted the matter to the Commissioners to determine the appeals against the assessments in accordance with his judgment. Anduff now appeals from that order.
The judgment of the judge is now reported ( [1996] S.T.C. 110) and the report includes the decision of the Commissioners. It is therefore unnecessary to do more than summarise the salient facts which they found.
(1) Anduff in the periods in question acquired 78 sites throughout the U.K. and installed car washing facilities thereon.
(2) Anduff, whose only trade is that of operating car washes, uses the IMO car wash system, which was designed and developed in Germany.
(3) Each site is approximately 50m by 23m.
(4) The washing of the cars is carried out in a building called the wash hall, which is approximately 20m long by 6.5m wide, which contains the car washing equipment and through which the cars are pulled mechanically. There the cars are washed, dried, and, if the customer chooses, the underneath of the car is washed and the car is wax-polished.
(5) On one side of the building are a control room, lobby, staff WC, pump room, an open area containing the inspection covers for water tanks and a store.
(6) The control room contains the electric meters and switch gear, alarm system and control panel, which houses the electrical equipment constituting the "brains" of the IMO system, and a limited amount of furniture for the operator.
(7) Recycled water, collected in part from rain which falls onto the site and onto the wash hall roof, V-shaped for collecting rain, is used in the car washing process, only the final rinsing normally being done with fresh water.
(8) The reinforced base of the wash hall incorporates water tanks, ducts for drainage, for water circulation and for electricity and accommodates bases for the steel supports for the roof and for the first horizontal brush.
(9) The materials used for the wash hall are designed to enable the car wash operation to be conducted efficiently: the windows are waterproofed externally and internally, the walls are of a single skin dense engineering brick construction without damp proof coursing (save for the outer walls of the control room, lobby and WC) and the interior is waterproofed by means of tiling and rubberised wall finishes to confine the water used in the car washing within the wash hall.
(10) The roof and walls also serve to retain noise and exclude frost, and heating is provided in the wash hall so that car washing is available even in the coldest weather.
(11) Outside the wash hall there are bays where 2 or 3 coin-operated vacuum units, connected electrically through ducts to the control panel in the control room, enable customers to vacuum the inside of their cars.
(12) In front of the entrance to the wash hall there is a brick paviour area, the bricks being laid on a bed of sand, and there the site operator pre-washes the car with a high-pressure hose. A smaller level area of brick paviours is to be found outside the exit from the wash hall.
(13) Most of the site is covered in tarmacadam or similar material and laid out with signs and bollards. Other parts of the site are pavement cross-overs, concrete kerbs marking the edge of the site surface, fencing and landscaping.
Two findings made by the Commissioners are particularly relied on by Anduff. The first is this:
"The IMO system encompasses not only the machinery inside the wash hall which carries out the actual washing operation but the whole concept and design of each car wash site to ensure that the maximum number of cars can be processed efficiently and safely in the shortest possible time. Anduff car wash sites can clean up to 90 cars per hour, whereas the capacity of a normal roll over car wash plant is between eight and ten cars per hour. The wash hall to be found on each Anduff site can accommodate four cars at any one time."
The second, taken from the evidence of Anduff's construction manager, Mr. Moorman, is this:
"Layout of the site is crucial to the car wash operation as it must be able to cater for a queue of cars at peak trading times. The design ensures that cars pass round the site, through the wash hall and out of the exit as if on one continuous conveyor belt."
The Commissioners, having reviewed the authorities and found the facts, expressed their conclusion in this way:
"We have come to the conclusion that the Anduff sites, with the exception of the pavement cross-overs, the boundary fencing and the landscaping are to be viewed as a single unit of plant." (The pavement cross-overs referred to would appear to be those not within the site and so not a true exception as the Commissioners said of those within the site that they regarded them as "part of the site and therefore to be regarded as plant.) "We regard the wash hall not as a building but as a structure akin to a machine which takes into its large maw motor cars at up to four at a time, washes them thoroughly, dries them and ejects them. The structure is not there in order to provide protection from the elements although it may fulfil that purpose to a limited extent in so far as protection from frost and snow is concerned. The purpose of the structure is to collect water via its unusually shaped roof and to retain within the structure the water used in washing the cars so that it may be recycled again and again having been through the settling tanks and filters. Outside the wash hall the pre-wash and post-wash pads are provided for specific purposes connected with the trade and the remainder of the site is designed and operates as a conveyor belt leading cars from the public highway to the entrance to the wash hall and back to the highway. It also provides facilities for drivers to clean the interiors of their cars using the vacuum machines provided, if they wish to do so.
It is true that the control room offers some measure of protection from the elements to the operator but we regard this as de minimis. The operator does most of his work on the pre-wash pad, not inside the wash hall. The true role of the control room is to provide protection for the control panel. The size of the room is virtually dictated by the dimensions of the control panel and its opening doors."
They excluded the landscaping as it played no part in Anduff's trade; similarly they excluded the fencing as not playing any part "as a tool of Anduff's trade". They concluded:
"In the last resort the question in these appeals is very much one of fact and of impression. Having heard all the evidence and having visited and inspected one of the sample sites, namely that at Greenwich, we have come to the conclusion that, save for the landscaping and fencing, (and some of the cross-overs) Anduff sites are single units of plant. Although they are the premises from which Anduff trades, they are also the tools of Anduff's trade, each part of each site functioning as a necessary and integral part of the whole. Whilst we acknowledge that it is only in unusual cases that premises function as plant we believe that the Anduff sites are such unusual premises. As Templeman L.J. said in Benson v Yard Arm Club Ltd. [53 T.C. 67] at page 90E:
'It plainly appears, therefore, that if, and only if, land, premises or structures in addition to their primary purpose perform the function of plant, in that they are the means by which a trading operation is carried out, then for the purposes of income tax and corporation tax the land, premises or structures are treated as plant.'
In our judgment the Anduff sites are the means by which the Anduff trading operation is carried out."
The judge on the appeal to him also reviewed the authorities but said that the Commissioners seemed to have missed their significance. He accepted that a challenge could only be made on the principles of Edwards v Bairstow [1956] A.C. 14,...
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