Leeds Permanent Building Society v Procter
| Jurisdiction | England & Wales |
| Judgment Date | 30 July 1982 |
| Date | 30 July 1982 |
| Court | Chancery Division |
Chancery Division.
Mr. A. Park Q.C. and Mr. J.R. Gardiner, Q.C. (instructed by Messrs. Kingsford Dorman & Co.) for the Society.
Mr. R. Carnwath (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Goulding J.
Income tax - Capital allowances - Expenditure by building society on decorative window screens - Whether expenditure on provision of "plant" - Finance Act 1971 section 41 subsec-or-para (1)Finance Act 1971 - sec. 41(1).
This was an appeal by the Society from the finding of the General Commissioners that expenditure on screens placed in the windows of the Society's branch offices did not qualify for a capital allowance as it was not expenditure on the provision of "plant". In the Commissioners' view the screens formed part of the "setting" of the business and did not perform any business function.
The screens in question were of a decorative nature and all contained the Society's name in a prominent position. Each was readily removable and they were never left at a branch office which was vacated by the Society. It was argued for the Society that they performed a business function, namely attracting custom to the branch offices. In this, it was submitted, they were indistinguishable from the fascia boards and projecting signs used to proclaim the identity of the Society's offices. Those signs had been treated as "plant" by the Commissioners.
For the Crown it was argued that the function of the screens to attract customers was not sufficient to stamp them as plant. That had been the function of the ship in issue in Benson v. Yard Arm Club Ltd. 53 T.C. 67 and it was held in that case that the ship was not plant of the restaurant business. It was further argued for the Crown that items used to make the setting of a business more attractive do not satisfy the functional test so as to qualify as plant unless the provision of an attractive setting is itself found to be part of the trade processes or the item or form of the attraction is dictated by the nature of the trade processes. That argument was based on a principle drawn by reconciling a number of authorities on the meaning of the word "plant".
Held, appeal allowed.
1. The determination of the Commissioners was not consistent with the facts they found. There is nothing in those facts which shows that the screens were part of the setting. Nor were they part of or inseparably annexed to the structure of the branch. On the facts found, the screens were part of the furniture with which the trade of the Society was carried on in a branch office. They served a function in attracting the attention of the public in order to bring business to the Society. Accordingly, the Commissioners erred in law.
2. Unlike the ship in Benson's case the screens in this case were an adjunct to the carrying on of the business rather than the premises of the business.
Goulding J.: This is an appeal from a decision of the General Commissioners for the Leeds Division. Those Commissioners in 1979 heard and determined an appeal by the Leeds Permanent Building Society, which I shall refer to simply as the Society, against an assessment to corporation tax for the year ending 30th September 1975. The General Commissioners decided that appeal in favour of the Crown and the Society now appeals by way of Case Stated to this Court.
The question before the Appeal Commissioners was whether expenditure by the Society in respect of certain articles in the form of screens, which the Society places in the windows of its branch offices, qualified for a capital allowance as being expenditure incurred by the Society in the provision of plant for the purpose of the Society's business. The relevant statutory provision is in the Finance Act 1971 whereFinance Act 1971 section 41subsec. (1) of sec. 41enacts as follows:
Subject to the provisions of this Chapter, where-
(a) a person carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes of the trade, and
(b) in consequence of his incurring the expenditure, the machinery or plant belongs to him at some time during the chargeable period related to the incurring of the expenditure,
(c) there shall be made to him for that period an allowance (in this Chapter referred to as "a first-year allowance") which shall be of an amount determined in accordance with Finance Act 1971 section 42section 42 below,
and the effect of Finance Act 1971 section 42sec. 42for the relevant period was that a first-year allowance should be equal to the whole of the expenditure in respect of which it was made.
The appeal, as argued before the Commissioners and here, turns simply on the interpretation of the statutory word "plant" in relation to the screens on which the Society had made the expenditure in question. The Commissioners hearing the appeal visited a number of the Society's branch offices to see examples of the screen which the Society had acquired. They found that they were for the most part of five distinct types as regards construction and appearance, but it is common ground that nothing turns on variety displayed by the articles.
Among the facts found by the Commissioners were the following: It is the practice of the Society to install decorative screens incorporating the Society's name and sometimes its crest in the windows of its branch offices. "Crest" I think should be interpreted in a broad sense as including the whole coat of arms of the Society. The Commissioners further found that as a building society the Society needs to attract investment money and now has to be very competitive to obtain funds and considers it important that the public should be attracted into its branch offices. After the end of the war in 1945 competition intensified and the Society decided that the appearance of its offices must be made more attractive as it needed more and more investors to satisfy the ever-growing demand for mortgages. Later, in the late fifties, the Society decided that its shopfronts were still not, in the words of the Commissioners, "eye-catching enough". Accordingly a new design with a free-standing low screen inside the window was introduced in place of the boxed-in style of shopfront previously employed. It is those low screens which are the subject matter of the litigation.
The screens, as the Commissioners found, are now highly decorative; all still contain the Society's name in a prominent position and their purpose is still the same. They do not however make any specific reference to the nature of the Society's business or to the particular advantages which it offers to its customers. Their sizes vary to match the shop frontage which is usually at eye height, about 4'6", and generally covering 80-90 per cent of the available width of the window. The Society tries to make its branches as much like retail shops as possible. The purpose of the screens is to attract the attention of the passer-by; then the passer-by may notice the Society's display cards, giving particulars of investments and other facilities offered by the Society, placed in front of or beside them. The screens are attached by screws or placed in slots. They are therefore readily removeable and can be replaced. They are also capable of being repositioned in the same office or elsewhere, but this is only rarely done. All screens are individually made for particular premises and many of the screens are individually designed to attract local people.
The Society, so the Commissioners found, considers that there is no specific evidence as to the effect of the screens as they form part of its general advertising policy. They are however a very important part of the Society's visual presentation of its branches together with the high level fascia signs and projecting signs...
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