Senex Investments Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 March 2015 |
| Date | 04 March 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Ruthven Gemmell,WS, Mr Ian M P Condie, CA
Philip Simpson, QC appeared for the Appellant
Stephen O'Rourke, Advocate instructed by the Office of the Advocate General for Scotland for the Respondents
Capital allowances – Business Premises Renovation Allowance – Whether a former church was a qualifying building as last been used for the purposes of a trade, profession or vocation – Yes – Whether a vestry used as an office (whether or not for the purposes of a trade, profession or vocation) – Yes – Capital Allowances Act 2001 (“CAA 2001”), s. 360C – Appeal allowed.
The First-tier Tribunal (FTT) allowed a taxpayer company's appeal against HMRC's decision to disallow its claim for Business Premises Renovation Allowances (BPRAs) on a derelict church which it redeveloped, finding that the church was a qualifying building as it had last been used for the purposes of a trade, profession or vocation. The FTT also found that even if that was incorrect the church vestry was used as an office and therefore the claim for that proportion of the building should have been allowed.
Senex Investments Ltd (Senex) was a property leasing company. Senex purchased a derelict church (the premises), which had previously been occupied by the Wesleyan Reform Union (WRU), and converted part of it into a restaurant which it then leased out. Senex made a claim for BPRAs, but HMRC disallowed the claim on the basis that the premises had not last been used for the purposes of a trade, profession or vocation and was therefore not a qualifying building within the meaning of CAA 2001, s. 360C. Senex appealed against HMRC's decision saying that the premises were last used for the purposes a trade, profession or vocation within the meaning of CAA 2001, s. 360C(1)(c)(i) and separately, that the vestry had last been used as an office within the meaning of CAA 2001, s. 360C(1)(c)(ii) and had been converted or renovated as required by the BPRAs rules.
The FTT found that WRU was an unincorporated association, a church, and whilst being a non-profit making organisation aimed to meet its costs or even make a surplus and it was clear from the Constitution of Church Membership and Practice and the Ministerial Statement that the church was run on business lines. The FTT was referred to various instances of the term trade, profession or vocation and noted that in relation to CAA 2001, s. 360C the term had no specific qualification such as a requirement for there to be a view to realising a profit or for it to be conducted on a commercial basis, as required by other parts of the tax legislation. The FTT considered that the church had been in a similar position to the company of naval architects referred to in William Esplen, Son & Swainston Ltd v CIR (19919) 2 KB 731 and that although the company was not carrying on a profession they were carrying on a trade or a business. The Tribunal accepted Senex's submission that WRU did not have to make a profit or have a profit motive to be carrying on a trade, profession or vocation. The FTT considered that, with reference to IR Commrs v Stonehaven Recreation Ground Trustees TAX(1930) 15 TC 419, the relevant activity, depended on what the church actually did and the practical effect of what it did, and not on the motivation or even the results of its activities. The FTT considered that taking the Constitution and other WRU documents and intentions together the church was conducted on commercial principles and constituted a trade.
HMRC also submitted that Senex's claim went against the intention of Parliament when introducing BPRAs, which was to address the mischief of unused shops and that BPRAs relate to business premises. The FTT considered that this assessment was too narrow, finding that “the premises were in a derelict state in a disadvantaged area and…they met what Parliament sought to achieve…to foster the regeneration of deprived areas in the UK, by encouraging private investment in those areas in order to increase local enterprise and employment.” The FTT found that BPRAs were to address the mischief of derelict business property in deprived areas and/or the redevelopment of brownfield sites.
When the derelict church was purchased by Senex the vestry contained a book shelf, a table and a chair and the FTT accepted that Senex's description of the vestry as an office to be entirely credible. Although HMRC suggested that the vestry might have been a place to change the FTT found that there was no mention of there being a wardrobe or other cupboard in which clerical robes might have been stored to support that submission.
The FTT considered that the premises were a qualifying building and had last been used for the purposes of a trade, profession or vocation and that the vestry was used as an office. The FTT considered that is what a vestry would be used for and that the claim for this proportion of the building should, in any event, be allowed as it was not conditional on whether there was use for the purposes of a trade, profession or vocation in any event. The appeal was accordingly allowed.
This case highlights the need to consider the meaning of terms used in tax legislation by reference to the actual legislation at issue and not other instances where the same or similar terms are used.
The case also emphasises how accountants can save their clients tax, in this case almost £40,000. The taxpayer had not considered the possibility of claiming BPRAs at the time it renovated the church, but subsequently made a claim on the advice of its accountant.
[1] This is an appeal by Senex Investments Limited (“Senex”), a property leasing company, against the refusal by the Commissioners for HM Revenue & Customs (“HMRC”) to grant a claim for Business Premises Renovation Allowance (“BPRA”) under section 360A of the Capital Allowances Act 2001 (CAA) for the periods ended 30 September 2011, 30 September 2012 and 31 December 2012. The relevant tax amounts to £36,703.
[2] HMRC's decision to disallow the claim for BPRA was intimated to Senex on 9 January and 14 March 2014.
[3] A written Statement of Case and Skeleton Argument was submitted by HMRC and a Skeleton Argument submitted by Senex.
[4] The Tribunal had before them, in addition, a Bundle of Authorities and also a Witness Statement of Mr Colin McLean Beattie (“CB”) a shareholder and director of Senex who gave evidence and was a credible and reliable witness.
[5] The issue before the Tribunal was whether the premises purchased and partially redeveloped by Senex had last been used for the purposes of a trade, profession or vocation for the purposes of section 360C of the CAA and, in the alternative, whether the claim should be allowed pro rata to the extent that part of the premises was used as an office.
[6] See Appendix 1.
[7] See Appendix 2.
[8] Senex is a limited company, investing in property, owning a number of bars/restaurants, residential property and offices.
[9] CB, as a director of Senex, is involved in seeking investment opportunities and running the company's business.
[10] Senex owns a number of public houses, one of which was situated next door to a former church at 1 Montrose Street, Clydebank. This church (“the Premises”) had been derelict for a number of years, having been sold to a property company who were unsuccessful in obtaining planning permission to develop it. The public house had been owned since 2003 and let out so that CB was not often at the premises but he was aware of the potential of purchasing the adjacent church (“the Premises”).
[11] On or about 2010, Senex purchased the Premises and it was inspected by CB. CB referred to a plan and described the building as being derelict with pews and the pulpit still intact in the church area. The church hall contained sports equipment but, otherwise, was “a bare looking room full of rubbish”; there was a relatively small kitchen containing an oven and storage and a Vestry which contained a book shelf, a table and a chair. There were also WCs.
[12] CB stated that in order to save on non domestic rates, Senex's refurbishment of the church property meant that the church hall was “bricked up” and sealed off so that it remained empty and unused and it still is.
[13] Senex carried out a refurbishment of the Premises and CB was the site manager over a period of two and a half years. The long period was as a result of difficulties with the licensing authority and their policies and the then strictures of the Licensing Act which were subsequently changed.
[14] CB stated he was on site almost every day for some time at least during the two and a half year construction period.
[15] The conversion of the Premises created a restaurant, Casa Italia, which was leased by Senex and included WCs for the restaurant's customers, WCs for the staff and changing/storage facilities.
[16] CB had never seen the Premises operating as a church but, based on his experience of his own church and the layout of the Premises and his inspection of it, stated the church would have been used for church services and the church hall for all manner of events such as raising funds and jumble sales and that the Vestry would have been used as an office.
[17] CB stated that he had not considered the possibility of obtaining BPRA when he purchased the property but subsequently made the claim on the advice of his accountants.
[18] Reference was made to the constitution of the Wesleyan Reform Union (“WRU”) as approved by the conference in 2011. It was unclear whether this was the constitution in force prior to 2003 when the Premises were occupied by the WRU.
[19] In addition to the Constitution, WRU had a Confession of Faith approved by their conference in 1970 and amended by a conference in 2008, rules on church Membership and Practice and a Ministerial Statement.
[20] The aim of WRU was “to extend God's love and encourage closer fellowship among the...
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London Luton Hotel BPRA Property Fund LLP
...of case so late in the day, we dismissed the application. Relevant Legislation [27] Although the Tribunal in Senex Investments Ltd [2015] TC 04312 considered whether a former church was a “qualifying building” for BPRA purposes, we understand that this appeal is the first occasion in which ......