Tucker v Granada Motorway Services Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ORR,SIR DAVID CAIRNS,LORD JUSTICE STAMP |
| Judgment Date | 14 June 1978 |
| Judgment citation (vLex) | [1978] EWCA Civ J0614-2 |
| Date | 14 June 1978 |
| Court | Court of Appeal (Civil Division) |
(H.M. Inspector of Taxes)
[1978] EWCA Civ J0614-2
Lord Justice Stamp
Lord Justice Orr and
Sir David Cairns
In The Supreme Court of Judicature
Court of Appeal
(On Appeal from the Chancery Division)
MR. PETER REES, Q.C. and MR. R. FITZGERALD (instructed by Messrs. Turner Peacock, London) appeared on behalf of the Appellants.
MR. STEWART BATES, Q.6. and MR. B. DAVENPORT (instructed by the Solicitor of Inland Revenue) appeared on behalf of the Respondent.
LORD JUSTICE STAMP; in this appeal the relevant facts are clearly and concisely stated in the report of the case in the court below, to be found in 1977 1 WLR. at page 1413, and I need not repeat them. The Court is also indebted to the learned Judge for his clear analysis of the authorities relied upon in the court below, to which Mr. Rees, appearing for the appellants in this Court, could hardly take exception. I say 'hardly' because there were one or two phrases in the Judge's summary of the case of which he did express some disapproval.
Mr. Rees, in opening this appeal, submitted that the authorities show that a payment made by a trader once and for all is only to be regarded as a capital payment and so not deductible in computing the profits of the trade if it is not only made once and for all but also with a view to bringing into existence an asset or advantage for the enduring benefit of the taxpayer's trade in such a way that fixed capital endures. Leaving aside for the moment the speech of Lord Wilberforce in Inland Revenue Commissioners v. Carron Co., I would accept that the result of the cases is as propounded by Mr. Rees. That was the way that Mr. Justice Rowlatt put the matter in Anglo-Persian Oil Co. Ltd. v. Dale in the court of first instance in 16 Tax Cases, p. 253, the relevant passage being at page 262. Mr. Justice Rowlatt there, after remarking that it had been argued that the expenditure there in question was capital expenditure because it secured an enduring benefit by getting rid of an onerous contract, remarked that that was not to state the material thing and was completely inconclusive. He went on to say;
"I think I know where that phrase comes from, and that is from the speech of Lord Cave in the case of Atheitnn v. British Insulated and Helsby Cables Ltd., which is reported in 10 T.C. on page 192, where he said this: "When an expenditure is made not only once and for all, but with a view to bringing into existence an asset or advantage for the enduring benefit of a trade" then it is capital. But the fallacy is in the use of theWord 'enduring'. What Lord Cave is quite clearly speaking of is a benefit which endures in a way that fixed capital endures; not a benefit that endures in the sense that for a good number of years it relieves you of a revenue payment. It means a thing which endures in the way that fixed capital endures. It is not always an actual asset, but it endures in the way that getting rid of a lease or getting rid of onerous capital assets or something of that sort, as we have had in the cases, endures. 1 think that the Commissioners, with great respect, have been misled by the way in which they have taken 'enduring' to mean merely something which extends over a number of years. I do not quite understand how the view that they appear to have taken is consistent with the numerous cases such as Hancock's case or any of the others."
Then he went on to says:
"That is how it strikes me on that footing. There is no sort of question so far of any question of fact. I do not question what they say about the facts, or claim a jurisdiction to question what is an enduring benefit by getting rid of an onerous contract. All I say is that it does not go far enough. When I look at the facts, so for, all I see is one thing, that it is getting rid of a payment which falls to be charged to the revenue account every year, namely payment of commissions to people who run the business."
In the instant case the lease was clearly part of the fixed capital of the taxpayer's business. If the taxpayer had paid a premium to obtain it, the payment of the premium would have been a capital payment as one made not only once and for all, but also with a view to bringing into existence "an asset or advantage for the enduring benefit of the taxpayer's trade", namely, the lease. It would have been of enduring benefit partly because it would have operated to reduce the annual rent which would no doubt have been payable had not the premium been demanded and paid. The payment here in question reduced the future payment of the rent during the whole period of the residue of the term of the lease. It operated to relieve the taxpayer of the burden of the covenants for payment of rent contained in the lease and it operated to relieve them from those payments throughout the whole period of the lease. As a result, it seems to me beyond peradventure that thetaxpayer had a more favorable lease than they had before, and I can see no difference in principle between the transaction which in fact took place and one where under the same result would have been achieved by the surrender of the lease and the granting of a new lease at the reduced rent for a premium of £ 122,220. In as much as the £122,220 in fact operates to increase the value to the taxpayer of the lease which is part of his fixed capital, the advantage procured cannot in my judgment be said to endure for the benefit of the trade otherwise than and I quote the words of Mr. Justice Rowlatt - "in the way that fixed capital endures."
Mr. Rees submitted in this Court, as he did in the court below, that the payment of the money reduced the burden of recurrent business expenses which happened to be in the form of rent chargable against the revenue similar to the reduction obtained in the Anglo-Persian case, and that the payment was made with that end in view. It is no doubt correct that the purpose was to reduce the burden of recurrent business expenses and if it had been made to obtain variation of the terms of a trading contract in a way to benefit of the taxpayer, it might have been treated as a regular revenue payment, because it would not have brought into existence an advantage enduring in the way that fixed capital endures. I cannot, however, accept the conclusion that the fact that the advantage here was a variation in the terms of the lease making the lease less onerous than it was, the fact that the lease was part of the fixed capital of the business and not a trading contract makes no difference. Unlike a payment made merely to obtain better trading terms, here the payment operated to...
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