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)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE FOX,LORD JUSTICE LLOYD,LORD JUSTICE GLIDEWELL |
| Judgment Date | 07 December 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J1207-6 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 December 1988 |
| Docket Number | 88/1058 |
[1988] EWCA Civ J1207-6
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HOFFMANN J.
Royal Courts of Justice
Lord Justice Fox
Lord Justice Lloyd
and
Lord Justice Glidewell
88/1058
MR. G. R. AARONSON, Q.C. (instructed by Messrs Slaughter & May) appeared on behalf of the Appellants (Appellants)
MR. A. G. MOSES (instructed by the Solicitor of the Inland Revenue) appeared on behalf of the Respondent (Respondent)
These appeals from decisions of Hoffmann J. raise again the question of the meaning of the word "plant" in relation to capital allowances for tax purposes. The relevant statutory provision is section 41(1) (a) of the Finance Act 1971 which grants allowances for expenditure incurred by a person carrying on a trade "on the provision of machinery or plant for the purposes of the trade".
There are two appellants, Wimpy International Ltd. ("Wimpy") and Associated Restaurants Ltd ("AR").
Wimpy owns and franchises restaurants serving meals the main item in which is usually a hamburger. AR owns restaurants trading under the name Pizzaland serving meals the main item in which is usually a pizza. The dispute is concerned with expenditure which Wimpy and AR incurred on various fixtures added to the structural shells of their restaurants. It is not in doubt that these items were designed to attract potential customers to the restaurants and to provide a particular type of atmosphere which Wimpy and AR considered conducive to the enjoyment of the type of meals which they served. It was the intention at the time of their installation that most of the items should be renewed after five years or so though they would probably remain usable for a much longer period.
The items in question before Hoffmann J. were as follows:
WIMPY
Reference Numbers used by Commissioners
| 1 | Shop fronts |
| 2 and 3 | Floor and wall tiles Suspended ceilings (Victoria) |
| 7, 8, 9, 21 and 25 | Mezzanine and raised floors, balustrades, stairs and accessory work |
| 10 | Light fittings |
| 24 | Trapdoor and ladder |
| 2 | Artex on walls |
| 4 and 5 | Floor and wall tiles |
| 6 | Shop fronts |
| 7 | Suspended ceilings |
| 8 | Raised floors |
| 9 | Flooring other than tiles |
| 11 and 22 | Fire doors and fire proofing of walls |
| 19 | other wall finishes |
The Commissioners held that none of these items was plant. Hoffmann J. upheld the decision of the Commissioners on all the items except No. 10 (the light fittings) which he held to be plant. Wimpy and AR appeal from that decision, save insofar as it applied to the electric light fittings. There is no cross-appeal by the Revenue. Hoffmann J. approached the matter by reference to the familiar definition of "plant" by Lindley L.J. a century ago in Yarmouth v. France (1887) 19 Q.B.D. 647 at 658 that
"…in its ordinary sense, it includes whatever apparatus is used by a business man in carrying on his business,—not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business".
Hoffmann J. observed that it is implied in this description, first, that there is excluded anything that is not used in carrying on the business. Secondly, it excludes stock in trade. Thirdly, it excludes anything which is not "apparatus…goods and chattels fixed or movable live or dead or not employed in the business: that excludes the premises or place in or upon which the business is carried on". The judge's conclusion was that:—
"…although the three distinctions in Yarmouth v. France each involves a test which can be called functional, they are subtly different from each other. If the item is neither stock-in-trade nor the premises upon which the business is conducted, the only question is whether it is used for carrying on the business. I shall call this the 'business use' test. However, under the second distinction, an article which passes the business use test is excluded if such use is as stock-in-trade. And under the third distinction, an item used in carrying on the business is excluded if such use is as the premises or place upon which the business is conducted. The fact that an item may pass the business use test but fail what I may call the 'premises' test is central to this case".
The judge's conclusion, upon a review of the authorities, was that the question was whether it would be more appropriate to describe the items as having or become part of the premises rather than as having retained a separate identity. On that basis the judge held that there was no reason to interfere with the conclusion of the Commissioners that the items now in issue were not plant.
The appellants' approach, on the other hand, is whether the question is whether the item in dispute performs or is part of an item which performs the sole function of housing the business or whether it performs some other distinct business purpose. If it does it is plant even if, in ordinary terms, it would be described as part of the premises.
The resolution of these difference requires I am afraid some reference once again to cases which have already been much discussed and explained.
J. Lyons and Co. Ltd. v. Attorney-General [1944] Ch. 281 is the case in which Uthwatt J. distinguished between "plant" and "setting". It was concerned with a claim by Lyons for war damage compensation in respect of items destroyed by enemy action in one of their teashops. The items were electric lamps, the sockets into which the lamps were fitted and the cords connecting the lamps with the electric wiring of the premises. Technically the question was whether the items were "land" within the meaning of the War Damage Act 1943; if they were, compensation was payable. "Land" was defined as including any building or works situated over or under the land other than plant or machinery not expressly included by the terms of the section as part of the land. Lyons contended that the items were "plant". It was not contended that, if they were not plant, they formed part of the building. Uthwatt J. rejected the claim. He said (at p.287):—
"…the question at issue may, I think, be put thus. Are the lamps and fitments purely to be regarded as part of the setting in which the business is carried on or as part of the apparatus used for carrying on the business? The lamps and their fitments are owned by a caterer and used in premises exclusively devoted to catering purposes, but the presence of lamps in this building is not dictated by the nature of the particular trade there carried on or by the fact that it is for trade purposes that the building is used. Lamps are required to enable the building to be used where natural light is insufficient".
The items were not plant by any test. The case is only of any note for present purposes because of the distinction drawn by Uthwatt J. (at page 287) between "plant" and "setting". This might suggest that the items were part of the premises. They were not. Uthwatt J. (at page 287) accepted that "plant" did not include the place in which the business is carried on. But the reason why the claim failed was because the items were unrelated to the trade; their purpose was simply to provide light when natural light failed.
Jarrold v. John Good & Sons Ltd. (1962) 40 T.C.681 brings us rather nearer to the present case. It was concerned with movable partitions. The accommodation requirements of the taxpayer company fluctuated. To meet its accommodation needs the company therefore acquired movable partitions which it placed in position as convenient within its building to form rooms of varying sizes. These were secured to the structure of the building merely by screws at the floors and ceilings. It was common ground that the partitions were not part of the structure of the building. Pennycuick J. and the Court of Appeal upheld the Commissioners' decision that the partitions were plant. Pearson L.J. (at page 696) put the position thus:
"…the short question in this case is whether the partitioning is part of the premises in which the business is carried on, or part of the plant with which the business is carried on. Either view could have been taken. It could have been said that the so-called partitioning, when erected, constitutes the internal walls of the building, which have the advantage of being movable, but which until they are moved will stand firm and solid, fully performing the functions of internal walls. So regarded, the partitioning would be part of the premises and not plant. The other possible view is that the Respondent Company, instead of having internal walls in its office building, needs to have and does have, for the special requirements of its business, movable partitioning, by means of which it can, in response to changing volumes of business in its departments or to the cessation of departments…rapidly and cheaply and without much interruption of business alter the sub-divisions of its office building. On that view of the facts, the partitioning undoubtedly can be regarded as 'plant'. I think the Commissioners have, in effect, preferred the second view, and it cannot be said that there was no evidence to support it,…"
Commissions of Inland Revenue v. Barclay, Curle & Co. Ltd (1969) 45 T.C.221 was concerned with expenditure on excavation...
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