Rolfe v Wimpey Waste Management Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 29 March 1988 |
| Date | 29 March 1988 |
| Court | Chancery Division |
Chancery Division.
Mr. Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
Mr. Stewart Bates Q.C. and Mr. Kevin Prosser (instructed by Mr. R.W. Grey, chief solicitor, legal department, George Wimpey plc) for Wimpey Waste Management Ltd.
Before: Harman J.
The following cases were referred to in the judgment:
Alianza Co. Ltd. v. Bell ELR[1906] A.C. 18
BP Australia Ltd. v. Commr. of Taxation of the Commonwealth of Australia ELR[1966] A.C. 224
I.R. Commrs. v. Pilcher TAX(1949) 31 T.C. 314
Kauri Timber Co. Ltd. v. Commr. of Taxes ELR[1913] A.C. 771
RTZ Oil and Gas Ltd. v. Elliss (H.M.I.T.) TAX[1987] BTC 359
Strick (H.M.I.T.) v. Regent Oil Co. Ltd. ELR[1966] A.C. 295
Tucker (H.M.I.T.) v. Granada Motorway Services Ltd. TAX(1977) 53 T.C. 92
This was an appeal by the Crown from the decision of a Special Commissioner that expenditure incurred in acquiring land for the disposal of waste material, which would be sold at a loss when the available space was filled, was revenue expenditure.
In the accounting periods under appeal from 1978 to 1984, the taxpayer company incurred substantial expenditure in acquiring rights to use land for tipping waste material. Some of the sites were freehold, some were leasehold and some were occupied under licences.
In order to use the sites further expenditure was incurred for planning permission, waste disposal licences, provision of roads, hard standing and other services. The projected life of a site was overall, from the start of preparatory work to its final state filled in and restored, seven to ten years with an earning life of four years.
The Revenue appealed against the decision of a Special Commissioner who decided that the money spent in acquiring the sites was expenditure incurred on current account. The Commissioner held that the sites had more in common with trading stock than with fixed assets and were properly to be classified as current assets, expenditure on which was deductible in computing the company's profits.
It was common ground that whether the expenditure was on capital or on income account did not depend on the nature of the interest acquired in the land, whether it was in fee simple, for a term of years or a licence.
The Revenue contended that where money was spent on a wasting asset, an amount in proportion to the consumption of the asset could not be deducted on a yearly basis. Although it was necessary to make allowance for depreciation in the accounts, the Income and Corporation Taxes Act 1970 section 130Income and Corporation Taxes Act 1970, sec. 130 precluded any deduction in a given year. The accountancy view and the tax view of what would be classified as revenue or capital expenditure were different. Once it was clear that the land was not acquired for resale, neither the purpose for which it was to be used, nor the length of time for which it would be used were helpful in determining the nature of the expenditure.
The company submitted that where a payment was made for the same purpose at intervals of a few years, it was not capital expenditure made once for all, but was revenue expenditure on current account. Moreover, the company did not want the land as such but only the airspace over it which was to be filled with waste material. That was required for the day to day management of its business and, when used up, could never be re-used. The airspace was therefore not part of the permanent structure of the company and was not a capital asset.
Held, allowing the Crown's appeal:
1. It was fallacious to apply a "once for all" test when considering a substantial business which bought a number of wasting assets one after another which would be replaced when they were used up. Although the expenditure was recurrent, each acquisition was once for all, particularly when a tangible asset such as land was acquired.
2. In order to provide a waste disposal service the company needed the airspace over the land acquired in which to get rid of the waste which it contracted to dispose of. But airspace was not an item of property unrelated to the ground. The company was acquiring real assets, even if only licences to use other people's land. (Strick (H.M.I.T.) v. Regent Oil Co. Ltd. ELR[1996] A.C. 295, followed; BP Australia Ltd. v. Commr. of Taxation of the Commonwealth of Australia ELR[1966] A.C. 224, distinguished.)
3. The acquisition of land for the purpose of using something on the land to produce a profit, after which the land would be disposed of, was capital expenditure. (I.R. Commrs. v. Pilcher TAX(1949) 31 T.C. 314, followed.)
1. On 10-14 March 1986 a Special Commissioner heard the appeals of Wimpey Waste Management Ltd. ("WWM") against the following assessments to corporation tax:
| Amount | Date of Assessment | |
| £ | ||
| Accounting period to 1978 | 10,000 | 16 July 1979 |
| 1979 | 10,000 | 14 August 1980 |
| 1980 | 100,000 | 12 February 1985 |
| 1981 | 1000,000 | 12 February 1985 |
| 1982 | 1000,000 | 12 February 1985 |
| 1983 | 1500,000 | 8 February 1985 |
| 1984 | 1887,968 | 2 August 1985 |
2. Shortly stated the question for decision was whether the acquisition cost of waste disposal sites and related expenditure was an allowable deduction in computing WWM's profits for corporation tax purposes, or whether such cost was not allowable on the grounds that it constituted capital expenditure.
3. [Paragraph 3 listed the witnesses who gave evidence before the Commissioner.]
4. [Paragraph 4 listed the documents proved or admitted before the Commissioner.]
5. The relevant facts, summaries of the evidence of the experts, the submissions of the parties, and the grounds on which the Commissioner allowed the appeals were set out in the decision.
6. The Commissioner was referred to the following authorities, in addition to those mentioned in the decision:
-
Commr. of Taxes v. Nchanga Consolidated Copper Mines Ltd.ELR[1964] A.C. 948
-
BP Australia Ltd. v. Commr. of Taxation of the Commonwealth of Australia ELR[1966] A.C. 224
-
Golden Horse Shoe (New) Ltd. v. Thurgood (H.M.I.T.) TAX(1933) 18 T.C. 280
-
I.R. Commrs. v. Broomhouse Brick Co. Ltd. TAX(1952) 34 T.C. 1
-
Hopwood (H.M.I.T.) v. C.N. Spencer Ltd. TAX(1964) 42 T.C. 169
-
E.C.C. Quarries Ltd. v. Watkis (H.M.I.T.) TAX(1975) 51 T.C. 153
-
I.R. Commrs. v. Pattison & Ors. TAX(1959) 38 T.C. 617
-
Bolton (H.M.I.T.) v. International Drilling Co. Ltd. TAX(1982) 56 T.C. 449
-
Southern (H.M.I.T.) v. Borax Consolidated Ltd. TAX(1940) 23 T.C. 597
-
Cooke (H.M.I.T.) v. Quick Shoe Repair Service TAX(1949) 30 T.C. 460
7. Figures were agreed between the parties in August 1986 and on 14 August 1986 the Commissioner adjusted the assessments accordingly.
8. The Revenue's representative immediately after the determination of the appeal declared dissatisfaction therewith as being erroneous in point of law and on 27 August 1986 required the Commissioner to state a case for the opinion of the High Court pursuant to the Taxes Management Act 1970 section 56Taxes Management Act 1970, sec. 56.
9. The questions of law for the opinion of the court were whether the Commissioner was correct in deciding that:
-
(2) WWM's landfill sites were current assets.
-
(3) The costs of acquisition of the sites and related expenditure were correctly dealt with in WWM's accounts for the years under appeal.
-
(4) The cost of restoration of the sites did not constitute expenditure on improvements.
1.1. In 1977 George Wimpey & Co. Ltd. decided to go into the waste disposal industry. To this end it acquired a 60 per cent interest in a company incorporated on 12 April 1978 with the name Trushelf & Co. (No. 163) Ltd., which on 8 May 1978 changed its name to Vac-All Plant Services Ltd. and on 20 June 1978 to Wimpey Waste Management Ltd. ("WWM"). By 1982, if not earlier, WWM had become a wholly owned subsidiary of George Wimpey plc ("Wimpey"). Shortly after its entry into the Wimpey Group, WWM acquired the net assets and business of the Beatwaste and Industrial Services Divisions of Powell Duffryn Pollution Control Ltd., a wholly owned subsidiary of Powell Duffryn Ltd. WWM's head office is in Chiswick. Accounts of WWM, audited throughout by Deloitte Haskins & Sells, chartered accountants, were prepared for the period 1 April to 31 December 1978 and for subsequent years ending on 31 December 1979 to 1984 inclusive. (The 1984 accounts were the most recent ones in evidence.) WWM appeals against corporation tax assessments for each of those accounting periods, as follows:
| Amount | Date of Assessment | |
| £ | ||
| Accounting period to 1978 | 10,000 | 16 July 1979 |
| 1979 | 10,000 | 14 August 1980 |
| 1980 | 100,000 | 12 February 1985 |
| 1981 | 1000,000 | 12 February 1985 |
| 1982 | 1000,000 | 12 February 1985 |
| 1983 | 1500,000 | 8 February 1985 |
| 1984 | 1887,968 | 2 August 1985 |
The agreed question for determination is whether the acquisition cost of waste disposal sites (or consumable "tipping space") and related expenditure is an allowable deduction in computing WWM's profits for corporation tax purposes, or whether such cost is not so allowable on the grounds that it is capital expenditure.
1.2. Initially the business conducted by WWM consisted of the provision of a waste disposal service to industry, and the provision of cleaning services using vacuum and other technological equipment. That continued until the end of 1981. With effect from 1 January 1982 the trade and undertaking of WWM's Industrial Services Division, which provided the cleaning services, was transferred to Wimpey International Services Ltd., a company which has since been sold.
1.3. WWM conducts its business from its head office in Chiswick and from its regional depots (para. 2.4. below).
2. The following account of the waste disposal industry and...
To continue reading
Request your trial
-
Able (UK) Ltd v HM Revenue and Customs
... ... sought planning permission to use part of the land for hazardous waste disposal. That application was refused. In 1991, Northumbrian Water ... , for example, ECC Quarries v Watkiss [1975] STC 578 and Rolfe v Wimpy Waste Management [1989] STC 454 ... By analogy he submitted that ... ...
-
Rolfe v Wimpey Waste Management Ltd
...61 C.L.R. 337 Tucker (H.M.I.T.) v. Granada Motorway Services Ltd. WLR[1979] 1 W.L.R. 683 This was an appeal from a decision of Harman J. ([1988] BTC 135) that expenditure incurred by a waste disposal company in acquiring landfill sites to be filled with waste material was capital expenditur......