Melluish (Inspector of Taxes) v BMI (No 3) Ltd and related appeals
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 October 1995 |
| Court | House of Lords |
| Date | 12 October 1995 |
Revenue - Corporation tax - Capital allowances - Capital expenditure incurred by finance companies on plant and machinery - Plant and machinery leased out for installation in local authority premises - Whether plant after installation “belonging” to finance companies - Whether finance companies entitled to writing-down allowances - “Interest in the relevant land” -
The taxpayer companies were members of a group of companies carrying on the trade of acquiring and hiring out plant and machinery to, inter alia, local authorities. They incurred capital expenditure on the provision of the plant and machinery for the purposes of their trade. A large part of the expenditure related to central heating equipment for installation by local authorities in council houses. Other expenditure was incurred on swimming pool equipment, replacement cremators for crematoria, alarm systems for installation in sheltered housing, lifts for installation in car parks and boiler equipment. In respect of each transaction a master equipment lease was executed between a taxpayer company and a local authority that specified in inserted schedules the equipment that was to be leased and provided that the lessee would return the equipment on the expiry of the lease and that in the event of non-payment of the rental the lease could be terminated and the equipment repossessed by the lessor. It was also provided that leased equipment would remain personal or moveable property that would continue in the ownership of the lessor notwithstanding that it might have become affixed to any land or building. In practice, the local authority ordered the equipment from the supplier and caused it to be incorporated in the premises and then submitted an invoice to the taxpayer company for the cost; the lease schedule was then executed. The inspector of taxes refused claims by the taxpayer companies for writing-down allowances under section 44(1) of the
On appeals by the Crown and the taxpayer companies:—
Held, (1) dismissing the taxpayer companies' appeals, that on the true construction of section 44(1) of the Finance Act 1971 property belonged to a person if he was the absolute owner of it in law or equity; that on being affixed to the local authorities' premises the equipment leased to them by the taxpayer companies had under the general law become part of the land and thus in law owned by the local authorities; that that consequence could not be avoided by the agreement of the parties; and that, although the master leases gave the taxpayer companies limited equitable rights in the equipment entitling them to its return and repossession in certain circumstances, equipment owned in law by the local authorities could not at the same time properly be described as belonging to the taxpayer companies within the meaning of section 44 (post, pp. 634B–C, 637D–E, H–638A, 639G–H, 640G–641C, 649D–F).
(2) On the Crown's appeals, that in respect of expenditure incurred by the taxpayer companies after 11 July 1984 section 59 of and Schedule 17 to the Finance Act 1985 provided a comprehensive and exclusive code for determining the circumstances in which capital allowances could be claimed in respect of fixtures; that the taxpayer companies had no “interest in the relevant land” within the meaning of paragraphs 1(2)(d), 2(1)(c) and 4(1)(a) of Schedule 17; that if the local authorities had incurred the expenditure on the provision of the equipment it would, by virtue of paragraph 2, have been treated “for material purposes” as belonging to them within paragraph 3(1)(d) and it was thus by paragraph 3(1) to be treated for material purposes as belonging to the taxpayer companies; but that if in any case a taxpayer company had specifically given unconditional approval to a purchase of equipment by a local authority and there had then been final agreement of the terms to be included in the lease schedule the taxpayer company would have incurred the expenditure when the local authority purchased the equipment; and that, accordingly, the question in each case whether the expenditure was excluded from entitlement to allowance by section 59(2)(a) as consisting of the payment of sums payable under contracts entered into on or before 11 July 1984 required a finding of fact and the cases should be remitted to the special commissioners for determination (post, pp. 634B–C, 645B, H–646C, D–G, 649A–F).
Per curiam. The relaxed rules as to reference to parliamentary materials introduced by Pepper v. Hart [
The following cases are referred to in the opinion of Lord Browne-Wilkinson:
Allen (Samuel) & Sons Ltd., In re [
Gough v. Wood & Co. [
Hobson v. Gorringe [
Morrison, Jones & Taylor Ltd., In re; Cookes v. Morrison, Jones & Taylor Ltd. [
Pepper v. Hart [
Reynolds v. Ashby & Son Ltd. [
Simmons v. Midford [
Stokes v. Costain Property Investments Ltd. [
The following additional cases were cited in argument:
de Falbe, In re; Ward v. Taylor [
Heritable Reversionary Co. Ltd. v. Millar [
Holroyd v. Marshall (
Hopwood v. C. N. Spencer Ltd. (
Lowe v. J. W. Ashmore Ltd. [
Lysaght v. Edwards (
Montague v. Long (
New Zealand Government Property Corporation v. H.M. & S. Ltd. [
Practice Direction (Hansard: Citation) [
Sargaison v. Roberts [
Tinsley v. Milligan [
APPEALS from the Court of Appeal.
These were consolidated appeals by the Crown and consolidated appeals by the taxpayer companies, B.M.I. (No. 3) Ltd., B.M.I. (No. 6) Ltd., B.M.I. (No. 9) Ltd., Barclays Mercantile Business Finance Ltd. and Fitzroy Finance Ltd., by leave of the House of Lords from the decision of the Court of Appeal (Dillon, Hoffmann and Saville L.JJ.) allowing appeals by the Crown and cross-appeals by the taxpayer companies from a decision of Vinelott J. By his decision, Vinelott J. had allowed in part appeals by the Crown by cases stated from the Commissioners for the Special Purposes of the Income Tax Acts, who had allowed appeals by the taxpayer companies against assessments to corporation tax.
The Court of Appeal refused applications by the Crown and the taxpayer companies for leave to appeal from their decision, but on 5 December 1994 the Appeal Committee of the House of Lords (Lord Jauncey of Tullichettle, Lord Slynn of Hadley and Lord Nicholls of Birkenhead) allowed petitions by them for leave. The appeals of the taxpayer companies were consolidated by order of the House of Lords dated 9 January 1995 and the appeals of the Crown by order dated 30 January 1995.
Graham Aaronson Q.C., Paul Morgan Q.C. and Stephen Jourdan for the...
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