Schofield (HM Inspector of Taxes) v R&H. Hall Ltd
| Jurisdiction | Northern Ireland |
| Judgment Date | 27 November 1974 |
| Date | 27 November 1974 |
| Court | Court of Appeal (Northern Ireland) |
COURT OF APPEAL (NORTHERN IRELAND)-
Corporation tax, Schedule D - Capital Allowances - Machinery and plant - Grain importer - Dockside silos - Whether whole silos plant of the trade - Capital Allowances Act 1968 (c. 3), s. 19.
The Appellant Company (which was resident in the Republic of Ireland but had a branch in Northern Ireland) carried on the business of importers of grain for sale to millers and to manufacturers of animal feeding-stuffs. It purchased grain principally through London brokers, and resold it c.i.f. to large customers and ex-silo to small customers. The grain arrived at Belfast in shiploads of up to 20,000 tons. It had formerly been bagged by hand, manhandled ashore and loaded by hand into customers' lorries or into coasters; but being obliged to equip itself for bulk unloading owing to the increasing demand for grain for feeding-stuffs for battery-farmed hens and pigs, the Company in 1940 built a silo at the dockside. After the war it built another such silo jointly with another grain importer. The silos were essentially transit silos; customers were expected to take delivery within seven days, and an additional charge was made in default. The silos consisted, broadly, in a large concrete structure into which were built concrete bins, a small structure ("the workhouse") which was in effect the lift shaft, and plant and machinery consisting of gantries, conveyor belts, mobile chutes, etc. The grain was sucked up from the ship into the bins and from there released as required and permitted to descend by gravity, or by gravity assisted by machinery, into customers' lorries. The walls of the bins were either party walls with the next bin or the exterior walls of the silo.
On appeal against an assessment to corporation tax for the accounting period to 31st December 1969 the Company contended that the silos as a whole (and not only the machinery, etc. contained therein) qualified for capital allowances as plant used in carrying on its trade of grain importing. For the Crown it was contended, inter alia, that the silos were part of the setting in which the trade was carried on, and were not plant but industrial buildings. The Special Commissioners found that storage played only a trifling part in the Company's trade of grain importing and that the silos served an essential part of the overall trade activity, their separate function being to hold grain in a position from which it could be conveniently discharged in varying quantities. Applying the decision in Barclay, Curle&Co. Ltd. v. Commissioners of Inland Revenue 45 T.C. 221, they held that the silos were plant for the purpose of capital allowances.
Held, that in relation to the Company's trade the silos should be regarded as single units of plant and their external walls were not merely in the nature of a general setting in which a part of the operation was carried on, so that the Commissioners' decision was justified.
Barclay, Curle&Co. Ltd. v. Commissioners of Inland Revenue45 T.C. 221; [1969] 1 W.L.R. 675 applied.
Stated under the Taxes Management Act 1970, s. 56, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the Court of Appeal in Northern Ireland.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 13th February 1973 R.&H. Hall Ltd. (hereinafter called "the Company") appealed against an assessment to corporation tax made upon it for the year ended 31st December 1969 in the sum of £375,000.
2. Shortly stated, the question for our decision was whether two grain silos belonging to the Company were (a) (as the Crown contended) industrial buildings or structures, as the Company had previously accepted, ranking for allowances under Chapter I of Part I of the Capital Allowances Act 1968, or (b) (as the Company now claimed) machinery or plant, ranking for allowances under Chapter II of the said Part I.
(2) The following witnesses gave evidence before us: Mr. R. E. Foley, a director of the Company; Mr. R. Doherty, an officer of the Company with special responsibility for the silos in question.
(3) The following documents were admitted or proved:
(4) Memorandum and articles of association of the Company.
(5) Accounts of the Company for the year ended 31st December 1969, exhibit A.
(6) Details of expenditure on "Belfast Silo", exhibit B.
(7) Details of expenditure on "West Twin Silo", exhibit C.
(8) A number of plans, drawings and photographs relating to the silos.
(9) Such of the above as are not attached hereto as exhibits are available for the use of the Court if required.
(10) From the evidence, oral and documentary, we found the facts set out in paras. 4 to 12 below.
4. The Company, which is resident in the Republic of Ireland, is within the charge to corporation tax as maintaining a branch in Northern Ireland. Its business is the importation of grain and associated materials for sale to manufacturers of animal feeding-stuffs and to millers for milling flour. The business was carried on at Cork, Belfast, Dublin and Waterford in the last century, and in the present century the operations in Cork, Belfast, Dublin and Waterford were considerably expanded. So far as the Northern Ireland branch is concerned, there are between 20 and 30 millers in the Province who obtain their supplies of grain through the Company.
5. The method of conducting business is, briefly, as follows. The Company purchases, principally through London brokers, grain (which might be anywhere in the world when purchased); the grain becomes the property of the Company when bills of lading are received. Within one or two days the Company invoices the grain on to millers to meet orders; this is done in one of two ways, i.e. (1) big customers buy c.i.f. and the grain becomes their property when invoiced to them, which would normally be when it is in the ship's hold before reaching Belfast; in such cases (which form the larger part of the business) the Company makes a charge to its customer for transfer from ship to customer's lorries; (2) small customers buy the grain ex-silo, at a price which includes the cost of getting it from the silo into lorries.
6. The grain bought by the Company and resold to its customers arrives at Belfast in ships which might carry as much as 20,000 tons of grain. Before the silos came into use the grain was bagged by hand, manhandled ashore and loaded by hand into the customers' lorries or into coasters. As time went on it became necessary for the Company to equip itself for bulk unloading; if it had not done so it could not have remained in business, there being a considerable increase in the demand for grain for feeding-stuffs owing to the increase in battery farming of hens and pigs.
7. The first of the two silos, "Old Silo", was completed in 1940 adjacent to Pollock Dock. Details of the expenditure incurred thereon are in exhibit B. The increased demand for grain in the postwar years, together with the use of larger ships, made it necessary to construct a further silo, "West Twin", adjoining Victoria Channel. West Twin was built, owned and operated jointly by the Company and W.&R. Barnett&Co. Ltd., who carry on a similar business: details of the expenditure incurred by the Company thereon are in exhibit C.
(2) The two silos are essentially transit silos; the Company's customers are expected to take delivery within seven days of the grain's arrival at the silo, and if that time is exceeded an extra charge is made on account of the bin space taken up.
(3) The Company's accounts (exhibit A) contain two sheets showing silo working accounts. In these accounts (a) the item "Receiving, Weighing, etc." covers the charges made to all customers for delivery (para. 5(1) above); (b) the item "Despatch" is payments from shipowners for quick turn round of ships; (c) the item "Silo Charges" is principally the charges made for exceeding the seven-day period for collection; (d) the item "Delivery in Bags" is a charge for bagging where required-this is seldom done and the amount involved is very small; (e) the item "Silo Credits" is chiefly income from stevedoring; (f) the "stock" shown in the balance sheet represented grain paid for by Halls and not yet invoiced to the customer.
9. Grain-carrying ships hold, on the average, 15,000 tons of grain. Old Silo can unload 100 tons per hour from each of two suction units and can hold 20,000 tons, and West Twin can unload 200 tons per hour from each of its two suction units and can hold 25,000 tons. West Twin moves between 15,000 and 20,000 tons a week, and in 1969 347,748 tons of grain passed through it. Enough grain to fill and empty the silo about 14 times passed through in 1969, 20 times in 1970 and 22 times in 1971. It is difficult to estimate the time lag between any particular ton of grain lying in the hold of a ship and arriving in the customer's lorry, as the silos worked on a "first in, first out" basis, but it is unlikely that the time would ever exceed two weeks. Twenty men are employed to work each of the silos.
10. The silos, and the method of operation, are described in paras. 11 and 12 below; they consist, broadly, in a large concrete structure into which were built concrete bins, a small structure (called the workhouse) containing machinery, and plant and machinery consisting of gantries, conveyor bands, mobile chutes and other machinery. There was no dispute as to the treatment for tax purposes of the said plant and machinery; the dispute concerned only the large concrete structure and the workhouse.
11. West Twin Silo
(2) Grain and feeding-stuffs are discharged from ships on the berth alongside and from road vehicles, conveyed to the silo, weighed, elevated and distributed to bins for re-delivery to road vehicles or coasters.
(3) Facilities also exist for conditioning by turning over material that has become overheated in transport and for the...
To continue reading
Request your trial
-
Cole Bros. Ltd v Phillips
... ... (Appellants) and Phillips (Inspector of Taxes) (Respondent) [1982] UKHL ... to be plant, and with the Northern Irish case ( Schofield v. R. & H. Hall Ltd. [1975] STC 353 ) where grain silos ... ...
-
HM Inspector of Taxes (Atwood) v Anduff Car Wash Ltd
... ... 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 ... are themselves plant, like the dry dock in Barclay, Curle or the grain silo in Schofield v Hall [ (1974) 49 T.C. 538 ]." Hoffmann J. commented (at p.84): "I take Lord ... ...
-
Wimpy International Ltd (Appellant (Appellant) Miss Gillian May Warland (H. M. Inspector of Taxes) (Respondent (Respondent) Associated Restaurants Ltd (Appellant (Appellant) Miss Gillian May Warland H. M. Inspector of Taxes) (Respondent (Respondent)
... ... premises are themselves plant, like the dry-dock in Barclay Curle or the grain silo in Schofield v. Hall ... 101 The word "embellishment" had first been used in the ... ...
-
Kenneth William Hall Benson (HM Inspector of Taxes) (Appellant) (Respondent) The Yard Arm Club Ltd (Respondent) (Appellant)
... ... His view was upheld in this court: see page 536 of the same report ... 16 In Schofield v. Hall , 49 tax Cases, 538 , the Court of Appeal in Northern Ireland had to decide whether certain silos erected by a company carrying on the ... ...