Urenco Chemplants Ltd and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 07 August 2019 |
| Neutral Citation | [2019] UKFTT 522 (TC) |
| Date | 07 August 2019 |
| Court | First Tier Tribunal (Tax Chamber) |
[2019] UKFTT 522 (TC)
Judge Jonathan Cannan
Mr Jonathan Peacock QC and Mr Michael Ripley of counsel instructed by Enyo Law LLP appeared for the appellants
Mr Jonathan Bremner QC and Mr Edward Waldergrave of counsel, instructed by Solicitor's Office and Legal Services of HM Revenue and Customs appeared for the respondents
Corporation tax – Capital allowances – Whether expenditure on certain elements of a nuclear-waste management facility expenditure on plant – Yes, in part – Whether any of the expenditure was on the provision of a building within CAA 2001, s. 21 – Yes, all – Whether any expenditure saved from exclusion by List C in CAA 2001, s. 23 – No – Appeal dismissed.
The First-Tier Tribunal (“FTT”) held that, whereas certain expenditure on elements of the facility which had been denied capital allowances was indeed expenditure on the provision of plant, it was in every case expenditure on the provision of a building within CAA 2001, s. 21 and did not fall within List C in CAA 2001, s. 23, which would have saved it from the denial of capital allowances under s. 21.
The appellants were members of the Urenco Group and operated nuclear-waste management facilities at Capenhurst in Cheshire. The disputed expenditure, which amounted to approximately £192m, was part of the total cost of approximately £1,000m incurred on the construction of a so-called Tails Management Facility. “Tails” are depleted uranium hexafluoride, which is both toxic and radioactive, and is a by-product of uranium enrichment. The Facility is intended to “deconvert” the Tails to produce hydrofluoric acid and uranium oxide. The acid can be sold for industrial purposes or destroyed if it is radioactively contaminated; the uranium oxide is stored on site for up to 100 years or returned for storage to its country of origin.
The disputed expenditure was essentially incurred on structures serving as floors (raft slabs), walls, roofs and roof cladding and internal radiation-shield walls within the three distinct parts of the facility – the cylinder-handling facility, the tails-deconversion plant and the uranium oxide store, and also items such as stairs, access platforms and plinths within the relevant structures.
The Tribunal judge elected to consider first whether any of the expenditure was expenditure on plant; second whether any of the expenditure was incurred on the provision of a building; and, if so, whether any of that expenditure fell within List C. If expenditure was not expenditure on the provision of plant under the general common-law test for plant in CAA 2001, s. 11, it was automatically ineligible for capital allowances. If any of the expenditure was expenditure on plant under that test, it would nevertheless be ineligible for capital allowances by virtue of CAA 2001, s. 21 if it was incurred on the provision of a building, unless it was on an item falling within List C in CAA 2001, s. 23, the effect of which was to disapply CAA 2001, s. 21 in respect of those items.
It was necessary first to identify the assets concerned and in so doing whether to treat each component of each facility separately or to treat all the components within a single structure as a whole. The Tribunal took the view that it would be artificial to consider components such as raft slabs, walls, roofs or roof cladding in any of the structures as having separate identities from those structures, but made exceptions for items such as stairs, access platforms, hatches and plinths.
By dint of this approach, 15 separate assets were identified for consideration: (1) the cylinder-handling facility (“CHF”) structure; (2) the internal shield walls within the CHF; (3) the raised platforms or plinths within the CHF; (4) the stairs and access platforms servicing the crane within the CHF; (5) the vaporisation facility in the tails-deconversion plant as a single structure; (6) the stairs and access platforms within the vaporisation facility; (7) the kiln facility within the tails-deconversion plant as a single structure; (8) the stairs and access platforms within the kiln facility; (9) the air-sealed crane-access hatch in the roof of the kiln facility; (10) the access hatches in the mezzanine and first floors of the kiln facility; (11) the concrete plinth supporting the hopper in the kiln facility; (12) the condenser facility within the tails-deconversion plant as a single structure; (13) the stairs and access platforms in the condenser facility; (14) the uranium oxide store as a single structure; and (15) stairs and access platforms servicing the crane in the uranium oxide store.
After finding that the trade carried on by the appellants was one of deconverting the depleted uranium hexafluoride so as to produce and store uranium oxide and produce hydrofluoric acid for sale, and reviewing the authorities, applying in particular the distinction between premises and plant, the Tribunal found that only items (3), (7), (9), (11) and (12) were plant. Item (3) – the raised platforms and plinths – because they performed a specific function of enabling rails for transportation to be at the correct height; item (7) – the kiln facility – because its principal function was to hold items of equipment at specific levels for the purposes of deconversion and the packing of the uranium oxide, on the analogy of the grain silos in Schofield and the dyehouse in Wangaratta; item (9) – the access hatch – because it allowed installation of the hydrolysis chamber; item (11) – the concrete plinth – because it provided seismic qualification for the hopper; and item (12) – the condenser facility as a structure – because it provided structural support necessary for the installation of the condenser and made it usable. The other items were part of the setting in which the trade was carried on and hence not plant within the common-law definition.
The Tribunal then went on to consider whether expenditure on the 15 identified items was expenditure on the provision of a building within CAA 2001, s. 21, although it was strictly necessary to consider that question in respect only of the items found to be plant. In so doing, the Tribunal accepted that the word “building” had to be given its ordinary everyday usage, but its function had also to be borne in mind. With that as a basis, it was clear that the CHF (item (1)) had the inherent characteristics of a building and it functioned as such and the vaporisation facility (item (5)) and the kiln facility (item (7)) could also naturally be described as a building in everyday terminology. The uranium oxide store (item (14)) was most clearly a building. Although the condenser facility (item (12)) was very much at the margin of what could naturally be described as a building, on balance it could nevertheless be properly so described. The internal shield walls of the CHF (item (2)) and the stairs and access platforms (item (4)) were properly viewed as walls, floor and stairs within List A in CAA 2001, s. 21 and thus expenditure on a building; similarly, the stairs and access platforms in the vaporisation facility (item (6)); the kiln facility (item (8)); the condenser facility (item (13)) and the uranium oxide store (item (15)). The raised platforms and plinths within the CHF (item (3)) were incorporated in the building, thus also ineligible for capital allowances under CAA 2001, s. 21(3)(a), as were the access hatches and the concrete plinth supporting the hopper in the kiln facility (items (9), (10) and (11)). In summary, every single identified item of expenditure fell within the definition of expenditure on the provision of a building within CAA 2001, s. 21.
It remained only to consider whether any of the identified items fell with the exceptions in items 1 (machinery), 4 (manufacturing or processing equipment) or 22 (alteration of land for the purpose only of installing plant or machinery) of List C in CAA 2001, s. 23. The Tribunal found that there was an important distinction in the legislation, which referred to expenditure on items 1–22 of List C but on the provision of items 22–33. It followed that Parliament had carefully chosen not to save the installation costs of, inter alia, Items 1 and 4 from the operation of CAA 2001, s. 21, only expenditure on those Items themselves. This meant that expenditure on installing machinery or equipment incorporated in or connected with a building remained part of the expenditure on the provision of the building. As to item 22 of List C, in order to qualify, expenditure has both to be on the alteration of land and for the sole purpose of installing plant or machinery. Whether or not the expenditure in question qualified as alteration of land, the structures were constructed in part at least to protect workers, the public and the environment and to provide premises for housing the plant and machinery. None of the disputed expenditure therefore fell within item 22.
The appeal would accordingly be dismissed.
Any case on the meaning of “plant” inevitably hinges on its own facts, but this case throws up some interesting general issues.
First, there is a potentially useful précis of the distinction between plant and premises in paragraph 89 of the decision.
Second, the distinction in CAA 2001, s. 23 between expenditure on an item in List C and expenditure on the provision of an item in that list. Section 23(3) provides that “Sections 21 and 22 also do not affect the question whether expenditure on any item described in List C is, for the purposes of this Act, expenditure on the provision of plant or machinery.” (note, not on the provision of any item). It is only items 23–33 of List C that include the words “the provision of” the item concerned. This was a distinction brought to the Tribunal's attention by counsel for HMRC and accepted, albeit qualified as a “fine distinction”, by the Tribunal.
Third, the Tribunal left open the question of law it identified with respect to the meaning...
To continue reading
Request your trial
-
Urenco Chemplants Ltd v R & C Commissioners
...aside – Case remitted to the FTT. The Upper Tribunal (UT) set aside the decision of the First-tier Tribunal (FTT) (Urenco Chemplants Ltd [2019] TC 07318) that capital allowances were not due on certain expenditure related to the construction of a nuclear site, and remitted the case to the F......
-
Urenco Chemplants Ltd and Another v R & C Commissioners
...September 2018, when Judge Cannan said that he was “shown all aspects of the TMF” before it became operational: see the FTT Decision, [2019] UKFTT 522 (TC), at [9]. The parties were represented before the FTT, as they have been subsequently, by Mr Jonathan Peacock KC leading Mr Michael Rip......
-
Gunfleet Sands Ltd and Others
...stems from two cases, namely Cole Brothers Ltd v Phillips (HMIT) [1982] BTC 208 (“Cole Brothers”) at p. 212 and Urenco Chemplants Ltd [2019] TC 07318 (“Urenco”) at [65]–[67]. [97] In response to Miss Wilson's submission that the correct test was that set out in Attwood (HMIT) v Anduff Car W......