We have not had any capital allowances tax cases  for a while, certainly not on the once-popular theme  of whether expenditure is on plant or on the setting in  which the trade is carried on. 

Accordingly, it was interesting to read the case of Rogate Services  Limited v HMRC TC03449 in which the question was whether  expenditure on a car valeting bay was plant and eligible for  capital allowances.  The First-tier Tribunal found as a question of fact that the expenditure  was on a building. This is hardly surprising because the company  sought permission for a double garage and expenditure was incurred  on walls, a floor, a ceiling and a roof. It sounds a bit of a stretch to  argue that this was not a building. The taxpayer claimed it could still  qualify as plant because it fulfilled an active function, being used to  apply glass coat finishes to cars.

The tribunal concluded that this particular building did not perform a  function. It was a place of work which did not amount to plant.

This sounds like a close run thing. In this building the relevant process  took place for the application of the glass coats to the cars. Was that  an active function? The taxpayer may have taken comfort from:

  • Cooke v Beach Stations Caravans [1974] 3 All ER 159 where  a swimming pool provided an active function of “pleasurable  buoyancy” for bathers;
  • Schofield v R&H Hall Ltd [1975] STC 353 where a silo provided an  active function of holding grain; and
  • Andrew v HMRC TC00799 where  a gazebo provided facilities for  customers to sit and drink.

However, in Brown v Burnley Football Club [1980] 3 All ER 244,  expenditure on a stand where people were able to sit and watch  the game was not plant although in O’Grady v Roscommon Race  Committee HC(I) 1992 (unreported) a race course stand where people  were able to sit and watch was plant (This contrasts with St John’s  School v Ward [1975] STC 7 where a gym was said not to have a  functional purpose. Presumably sitting and watching is a functional  purpose but carrying on gymnastic activity is not).

In Benson v Yard Arm Club [1979] 2 All ER 336 a floating restaurant  did not fulfil an active function, although it is difficult to see why  pleasurable dining is significantly different from pleasurable swimming.

Similarly, in Atwood v Anduff Car Wash [1997] STC 1167 a car wash  was held not to fulfil an active function. My experience of car washes  is not great, but I understand that they do a number of things actively  (like wash, clean and dry your car) which sounds a tad more active  than merely holding grain.

Having regard to all the above, the taxpayer might have thought that  his expenditure on the building might be OK. However, I think the  answer can be found from ss21 and 22, Capital Allowances Act 2001  which postdates all the above decisions.

Section 21 provides that expenditure on the provision of plant or  machinery does not include expenditure on the provision of a building.  Further, s22 provides that expenditure on provision of plant and  machinery does not include expenditure on the provision of a structure.

Accordingly, it would not seem to matter any more that the building  fulfils an active function. If it is a building or a structure (other than  those specifically excluded) it is disqualified from being plant and that  is the end of the matter.