Vibroplant Ltd v John Holland (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LAWTON,LORD JUSTICE TEMPLEMAN |
| Judgment Date | 03 December 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J1203-3 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 December 1981 |
| Docket Number | 81/0481 |
[1981] EWCA Civ J1203-3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (Civil Division)
On appeal from the Chancery Division (Revenue Paper) (Mr. Justice Dillon)
Royal Courts of Justice
Lord Justice Lawton,
Lord Justice Templeman
and
Lord Justice Oliver
81/0481
1978 No. 70
Mr. S.T. BATES, QC, and Mr. M.B. MUSGRAVE (instructed by Messrs. Kirbys, Harrogate) appeared on behalf of the Appellant.
Mr. D.R. WOOLLEY, QC, and Mr. R.J.A. CARNWATH (instructed by The Solicitor of Inland Revenue) appeared on behalf of the Respondent.
The judgment of the court will be delivered by Lord justice Templeman.
This is an appeal from a decision of Mr. Justice Dillon given on the 16th July 1980. The facts are succinctly set out in the judgment of the learned judge. The appellant taxpayer, Vibroplant Limited, carries on the trade of plant hire operators. The trade is carried on from a central headquarters and twenty-one depots. The taxpayer hires out a wide range of articles to customers; the articles include tractors, fork lift trucks generating sets, concrete mixers, air compressors, dumpers, compressed air tools and vibrating rollers. The articles are stored at the depots when they are not out on hire and at each depot the taxpayer has constructed a building in which the articles are cleaned, serviced and repaired when they return from hire. The taxpayer claims and the respondent Inspector of Taxes disputes that the building is "an industrial building" which qualifies under sections 1 and 2 of the Capital Allowances Act 1968 for an initial allowance and writing down allowances for the capital expenditure incurred by the taxpayer in constructing the buildings.
By section 7(1) of the Act an "'industrial building or structure' means a building or structure in use—(a) for the purposes of a trade carried on in a mill, factory or other similar premises, or" (b) (c) (d) for certain public utility undertakings concerned with power or transport or "(e) for the purposes of a trade which consists in the manufacture of goods or materials or the subjection of goods or materials to any process, or (f) for the purposes of a trade which consists in the storage" of goods or materials the subject of manufacture or process or importation, or (g) (h) (i) for the purposes of a trade involving the production or importation of certain natural resources. All the categories of trade defined in section 7(1) are concerned or involved with manufacture, processing, production or importation.
Mr. Bates on behalf of the taxpayer submits that the buildings in which the taxpayer's articles are cleaned, serviced and repaired are similar to a factory within the meaning of section 7(1)(a). In the case of vehicles, for example, he submits that a building which is designed to provide shelter and facilities for the repair and re-spraying of vehicles is similar to a factory which is designed to provide shelter and facilities for the manufacture and spraying of vehicles. But, as Mr. Woolley for the Revenue pointed out, the appearance may be the same but the functions are different. The taxpayer cleans, services and repairs his own articles in order that they may be hired out. The factory manufactures new articles for sale. Section 7(2) provides that the provisions of section 7(1) "shall apply in relation to a part of a trade or undertaking as they apply in relation to a trade or undertaking". It is not, therefore, material that the taxpayer's buildings provide facilities for the taxpayer's vehicles employed in the taxpayer's trade of hiring while a motor vehicle factory provides facilities for vehicles intended to be employed in the manufacturer's trade of selling. The vital distinction lies in the fact that neither the taxpayer's buildings nor the taxpayer's trade are concerned with manufacture.
In our judgment the distinction is to be deduced from all the provision of section 7. It appears from that section that the allowances now in question are intended to encourage manufacturing, processing, producing, importing and allied trades. In our judgment a building used for the purpose of cleaning, servicing and repairing vehicles and other articles belonging to a taxpayer whose trade consists of hiring out those articles for reward is not similar to a mill or factory because nothing similar to manufacture or processing is involved at any stage.
The distinction is confirmed by the authorities. In Ellerker v. Union Cold Storage Co. Ltd. (1939) 1 All-ER 23, Mr. Justice Macnaghten held that cold stores were similar to mills, factories or other similar premises because they were buildings in which goods were treated or processed. The learned judge said at page 28 that a factory "is a building where goods are made….. A mill is a building where goods are subjected to treatment or processing of some sort, and where machinery is used for that purpose".
In Commissioners of Inland Revenue v. Leith Harbour and Docks Commissioners (1941) 24 TC 118 at p. 123 the Lord President, Lord Normand, presiding over the First Division of the Court of Session said at page 123 that "the characteristic property of a factory is that it makes something". At page 124 he said "The essential of a mill is a process carried on by machinery by which the material subjected to it...
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