JC Decaux (UK) Ltd v Francis
| Jurisdiction | England & Wales |
| Judgment Date | 11 June 1996 |
| Date | 11 June 1996 |
| Court | Special Commissioners (UK) |
special commissioners decision
Mr DA Shirley.
Andrew Thornhill QC and Rupert Baldry, counsel for the taxpayer.
Mr JP Banks of the office of the Solicitor of Inland Revenue.
Capital allowances - Plant - Hire by taxpayer of street furniture to local authorities such as automatic public conveniences, council information panels, bus shelters - Taxpayer obliged to clean and maintain street furniture and entitled to place advertisements - Whether fixtures - Whether taxpayer had licence to occupy land by reason of right to enter to clean and display advertisements - Items were fixtures after installation, not chattels - No licence to occupy land - Capital allowances not available - Appeal dismissed - Capital Allowances Act 1990 section 22 section 24Finance Act 1971, ss. 41, 44; Capital Allowances Act 1990 section 51Finance Act 1985, s. 59, Sch. 17, para. 1,2 (see Capital Allowances Act 1990 section 51Capital Allowances Act 1990, ss. 51-59)
1. This is an appeal by J C Decaux (UK) Ltd, formerly named Street Equipment Ltd, against assessments to corporation tax for periods ending on 31 December in each year beginning with 1983 and ending with 1991. The fundamental issue is whether the Appellant is entitled to allowances in respect of capital expenditure incurred by it on the provision of plant for the purposes of its trade of hiring out or otherwise supplying for a consideration "street furniture" to local authorities. The so-called street furniture consists of Automatic Public Conveniences (APCs), Council Information Panels (CIPs), Bus Shelters and other items all of which will be described later. I am asked to give a decision in principle.
2. The issues are -
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(2) Whether all or any of the items are chattels when erected in streets or highways for which the local authority is responsible;
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(3) if any then become fixtures
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(a) whether they have "belonged" to the Appellant for the purposes of section 44(1) Finance Act 1971 or
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(b) whether expenditure thereon qualifies for an allowance pursuant to the provisions of section 59 Finance Act 1985.
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3. It is unnecessary to set out details of the capital expenditure involved or the allowances claimed. APCs feature in every year under appeal. 1989 is the first year in which expenditure was incurred on CIPs, Bus Shelters and Electronic Information Boards (EIBs). In 1991 expenditure was incurred on "Columns" and "Columns with APCs".
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(i) Oral evidence was given by Jean François Decaux who is the Chief Executive of the Appellant, which was formed in 1983, and by Colin Abiss who is the technical manager of the Appellant.
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(ii) A bundle of documents was put in containing (a) brief technical descriptions and drawings of all items; (b) APC detailed technical descriptions, Disabled Persons Conveniences (DPC) User Guide, APC Colour Designs, APC Promotional Brochures and APC Technical Drawing; (c) Copy of APC Rental Agreement with Glanford Borough Council dated 27 March 1991; (d) Copy street Furniture Agreement with Birmingham City Council dated 15 June 1990, and (e) Copy Street Furniture Agreement with the London Borough of Lewisham dated 21 January 1991. Five promotional videos were shown. Finally an album of good photographs of installed items was provided.
5. Before recounting the facts it will be convenient to explain briefly the practical issues.
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(a) If all (or any of) the items remain chattels when they have been installed in a street or on a highway, it is agreed that the Appellant is entitled to capital allowances under Finance Act 1971. If they then become fixtures, Mr A R Thornhill QC, who appeared with Mr Rupert Baldry on behalf of the Appellant, accepts that no capital allowances are available under section 41 Finance Act 1971 but he contends that the Appellant is entitled after 11 July 1984, in principle, to allowances pursuant to the provisions of s.59 Finance Act 1985. The possibility was mentioned but not elaborated that allowances might be available under section 44 Finance Act 1971 until items became fixtures when they would cease "to belong" to the Appellant.
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(b) Mr John Banks of the Solicitor's Office of Inland Revenue contended that all the items became fixtures when installed and that the Appellant is not entitled to allowances by virtue of the Finance Act 1985.
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(c) The point in issue under Finance Act 1985 is quite short. Paragraph 2 of Schedule 17 to the Act, so far as material, reads as follows:-
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(1) …in any case where -
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(a) a person incurs capital expenditure on the provision of machinery or plant…for the purpose of trade carried on by him…, and
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(b) the machinery or plant becomes a fixture, and
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(c) at the time the machinery or plant becomes a fixture he has an interest in the relevant land,
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then…on and after that time the fixture shall be treated…as belonging to the person concerned in consequence of his incurring the expenditure. …
The fixture is that machinery or plant:
which is so installed or otherwise fixed in or to a building or any other description of land as to become, in law, part of that building or other land
(section 59(1)). ""Relevant land" in relation to a fixture means the building or other description of land of which the fixture becomes part": Para 1(1) Sch 17. And "interest in land" relevantly means "a licence to occupy land": para 1(2)(e) Sch.17.
Mr Banks contends that the Appellant does not satisfy paragraph 2(1)(c). Mr Thornhill submits that the Appellant has a licence to occupy the land where the fixture is installed.
6. The Facts
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(A) General
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(B) The Appellant is a subsidiary of J C Decaux International AC, a French company which was established in 1964 and is the brainchild of Jean Claude Decaux, the father of Mr Decaux who gave evidence to this Tribunal. Father had an obsession for cleanliness and order particularly in large towns and cities. He sought to effect a thorough improvement of urban street amenities of all kinds - bus shelters, public lavatories, council information panels and so forth. He employed first class designers and used good quality materials for his products. There are now twelve subsidiary companies trading throughout Europe.
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(C) The Appellant, which currently employs some 180 people, commenced its business in 1983 by leasing APCs to local authorities at a rent. APCs accommodate one person. They contain a lavatory, wash basin and the ancillary facilities which one would expect to find in them. The Appellant is responsible for cleaning and maintaining the APCs (and now all the other items as well). The staff which carry out this function are thoroughly trained and a very high standard of cleanliness is provided. No APC (or other item) is hired out or provided without the Appellant's maintenance agreement. The APCs and all other items are made in France by the parent company from which the Appellant buys them. The other items, bus shelters etc, are not leased to local authorities. They are provided to them on the footing that the Appellant can make use of them to some extent for advertising. Here again the high standard of cleanliness is very much in point since advertisers do not appreciate their advertisements appearing on dirty, tawdry bus shelters for example. The Appellant's staff clean and keep clean all the items. All are cleaned at least once a week. The Appellant never subcontracts the cleaning. The Appellant has a sales department whose function is to seek out clients and agencies wishing to make use of its advertising facilities on a one week basis. The parent company is inventive. It has a skilled development department of engineers and architects. It develops new products and new systems. It improves existing products. It refurbishes its products. For example, the Appellant would return an APC to the parent company for refurbishment though it has the facility itself for carrying out running repairs in the UK where it holds spare parts.
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(D) The APCs and other street furniture are designed so as to be easily installed and easily removed. Agreements for hiring out APCs last for fifteen years. Agreements for other items are for a period of twenty years. Having regard to the length of the agreements it is important that the items should be capable of being easily removed since, apart from wear and tear, local authorities are keen to upgrade the equipment. Local authorities expect to be provided with the benefit of the parent company's technological developments. Moreover, equipment has to be moved should redevelopment take place. For example, 30% of the equipment in Sheffield had to be relocated three years after it was installed because a new tramway system was built. Much the same happened in Lewisham when the town centre was made into a precinct for pedestrians.
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(E) Agreements
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(2) Under the Glanford BC agreement the Appellant agreed to supply to the Authority an APC and rent it to and maintain it for the authority during the period of the agreement (15 years) at an identified location. The annual rent is £10,657.38 (excluding value added tax) which is index linked. An additional rent is payable if the average number of daily users exceeds sixty. The Appellant makes a charge in respect of the transportation, cranage, testing and assistance in installation. The Appellant is obliged to keep the APC supplied as far as is reasonably practical with all soap, disinfectant, paper and other products and materials required for its efficient use. The Authority in relation to the site has to obtain planning permission, carry out all preparatory works in accordance with the Appellant's specifications and make available throughout the rental period electricity, water and sewerage. The Authority is entitled to charge a fee for entrance to the APC. The Authority is responsible for all repair and maintenance and for loss or damage to the APC though...
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