Maco Door and Window Hardware (UK) Ltd v Revenue and Customs

Factual and Procedural Background

Company A, a United Kingdom importer and distributor of door and window hardware manufactured by its Austrian parent, Company B, erected a state-of-the-art warehouse and distribution centre in The City. Company A claimed writing-down capital allowances on the warehouse under section 3 of the Capital Allowances Act 1990 (“CAA 1990”), contending that the building was an “industrial building or structure” within section 18.

The claim’s journey was as follows:

• The Special Commissioner (Judge Avery Jones) allowed Company A’s appeal.
• In the Chancery Division, Judge Patten reversed that decision in favour of the Appellant (the Revenue).
• The Court of Appeal, by a 2-1 majority (Judges Carnwath and Hallett; Judge Collins dissenting), reinstated the allowances for Company A.
• The Appellant then appealed to the final appellate court. A majority of the panel (Judge Walker, Judge Neuberger and the Presiding Judge) allowed the appeal; Judge Scott and Judge Mance dissented.

Legal Issues Presented

1. Whether the warehouse was in use “for the purposes of a trade which consists in the storage … of goods or materials” within section 18(1)(f)(i) CAA 1990.
2. How the phrase “a part of a trade or undertaking” in section 18(2) should be construed—specifically, whether it applies only to a component of a composite trade that is itself a stand-alone trade, or whether it extends to any activity carried on within a single trade (such as storing one’s own stock).

Arguments of the Parties

Appellant's Arguments

• Section 18(2) is engaged only where the taxpayer’s business comprises two or more distinct trades; the subsection substitutes “part of a trade” for “trade” but still requires that the part be a trade in its own right.
• Company A’s business is a merchandising trade of buying and selling hardware; storage of its own goods is merely an incident of that trade and not itself a trade.
• Accordingly, the warehouse does not meet section 18(1)(f)(i), and the allowances were correctly disallowed.

Respondent's Arguments

• The natural reading of section 18(2) extends section 18(1) to any activity that forms part of a trade, whether or not that activity is itself a separate trade.
• Storage is a necessary and integral part of Company A’s trade; therefore the warehouse is used “for the purposes of” that part of the trade and satisfies section 18(1)(f)(i).
• Decades of administrative practice, and authorities such as Kilmarnock and Saxone, support the wider construction.

Table of Precedents Cited

Court's Reasoning and Analysis

Majority (Judges Walker, Neuberger and the Presiding Judge):

• The language and structure of section 18 show that subsection (1) is concerned with classes of trades, not with component activities.
• Section 18(2) merely extends subsection (1) to composite trades where one discrete trade within the composite meets the subsection (1) description; the “part” must itself be “in the nature of a trade.”
• Company A’s storage of its own goods is not a stand-alone trade; one cannot “trade by storing one’s own stock.”
• Policy considerations—encouraging particular industries—support limiting the relief to genuine trades; otherwise almost any business could re-characterise routine activities (e.g., parking delivery vans) as qualifying parts.
• Practicality favours a test based on recognisable trades rather than subjective subdivision of activities.
• Earlier authorities either involved genuine composite trades (Saxone) or did not address the present argument (Kilmarnock).

Minority (Judges Scott and Mance):

• The natural reading of “part of a trade” encompasses any constituent activity, whether or not it is a trade in its own right.
• Section 18(2) was enacted to widen, not restrict, the availability of allowances.
• Historical Revenue practice for over forty years treated activities like storage as sufficient; the shift following Bestway created unnecessary uncertainty.
• Authorities such as Kilmarnock demonstrate that Parliament intended the wider construction.

Holding and Implications

APPEAL ALLOWED. The warehouse is not an “industrial building or structure” for Capital Allowances Act 1990 purposes because Company A does not carry on a trade which consists in storage, and section 18(2) applies only where the relevant part of a composite trade is itself a separate trade.

Immediate consequence: Company A is denied the writing-down allowances claimed for the relevant accounting periods. Broader implication: the decision confines the expression “part of a trade” in section 18(2) to activities that would amount to autonomous trades if disentangled from the taxpayer’s wider business, thereby limiting capital allowances for warehouses and similar facilities used solely for storing a trader’s own goods.