Factual and Procedural Background
This appeal concerns the availability of capital allowances on a potato storage facility and whether it qualifies as plant, specifically whether it constitutes a silo for temporary storage or a cold store under the Capital Allowances Act 2001. The Appellant, a private limited company engaged in growing specialist crisping potatoes, incurred capital expenditure on constructing a warehouse designed for potato storage. The Appellant claimed plant and machinery allowances for this expenditure for the accounting period ended 31 March 2015 and subsequent years.
HMRC opened enquiries into the Appellant's corporation tax returns for the periods ended 31 March 2015, 2016, and 2017, ultimately issuing closure notices disallowing the claimed capital allowances. Following an internal review, the Appellant appealed to the Tribunal on 11 June 2019.
The hearing was conducted remotely on 10 February 2021, following a site visit to the premises. Witness evidence was provided by the owner of the Appellant and an HMRC officer. Both witnesses were found to be honest and truthful by the Tribunal.
Legal Issues Presented
- Whether the expenditure incurred by the Appellant was on plant or machinery within the meaning of section 11(4)(a) of the Capital Allowances Act 2001.
- Whether the potato storage facility qualifies as a silo provided for temporary storage within Item 28(a) of List C in section 23 of the Act.
- Whether the potato storage facility qualifies alternatively as a cold store within Item 18 of List C in section 23 of the Act.
Arguments of the Parties
Appellant's Arguments
- The potato store is plant because it actively performs a critical function in the Appellant's business of storing potatoes in the correct condition until needed by crisp manufacturers.
- The store operates as a single integrated unit performing functions such as drying, curing, cooling, minimizing water loss, circulating preservative gas, and managing fry colour, which are essential to the trade.
- The structural elements of the store, including automated ventilation systems, plenum chamber, specialized walls, cladding, and smooth concrete floor, are integral to these functions.
- The store enables storage of potatoes from harvest in September until as late as July the following year, maintaining quality that attracts significant bonuses from customers.
- The store qualifies as a silo for temporary storage under Item 28(a) of List C, relying on ordinary dictionary meanings and persuasive Tribunal authority in a similar prior case (May & anor v RCC).
- Alternatively, the store qualifies as a cold store under Item 18 of List C because it artificially cools and maintains potatoes at a temperature between 6.5 and 11.5 degrees Celsius, sufficient to preserve them.
- The Appellant rejected HMRC's narrow interpretation of "silo" and "temporary storage," arguing that the statutory language and ordinary meanings support inclusion of the potato store.
Respondents' Arguments
- The potato store is not plant but premises or a setting for the Appellant's trade; storage is generally not considered plant.
- The store is indistinguishable from other buildings externally and is essentially a building or structure rather than apparatus with which the trade is carried on.
- The functions maintaining the potatoes' condition are performed by plant and machinery within the building, not the building itself.
- The building could be suitable for storage of other commodities and its walls, roof, and floor perform no more than protective functions.
- The store does not meet the definition of a silo because it is not underground and stores potatoes (tubers), not grain or fodder as contemplated by the ordinary meaning and legislative intent.
- The storage period of 6 to 9 months is not temporary in the sense intended by the legislation, which was influenced by short-term storage examples such as the seven-day grain silos in Schofield v R & H Hall Ltd.
- The store is not a cold store as it is not objectively cold; it maintains a constant temperature but does not use mechanical refrigeration and relies on ambient air.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Yarmouth v France (1887) 19 QBD 647 |
Definition of "plant" as apparatus used by a businessman for carrying on his business, excluding stock-in-trade. |
The Tribunal applied this definition to find the potato store constituted plant integral to the Appellant's trade. |
| CIR v Barclay, Curle & Co Ltd (1969) 45 TC 221 |
Buildings or structures may also be plant if they fulfill a function of plant in the trader's operations. |
The Tribunal accepted the principle that a structure can be plant if it performs an active function essential to the trade, applying it to the potato store. |
| May & anor v RCC [2019] UKFTT 32 (TC) |
A horizontal grain store was held to be plant due to its active function of drying and conditioning grain, including integral structural features. |
The Tribunal found this decision persuasive and analogous, supporting the finding that the potato store is plant and a silo for temporary storage. |
| Patel & others v RCC [2019] UKFTT 620 (TC) |
Principles of judicial comity and persuasive authority among First-tier Tribunal decisions. |
The Tribunal cited this case to justify following the reasoning in May despite it not being binding precedent. |
| Schofield v R & H Hall Ltd (1974) 49 TC 538 |
Consideration of silos for short-term grain storage (up to seven days) as temporary storage. |
The Tribunal distinguished the present facts from Schofield, rejecting a narrow interpretation of temporary storage based solely on Schofield. |
| Attwood v Anduff Car Wash Ltd [1997] STC 1167 (CA) |
Purpose-designed sites or buildings cannot be considered plant merely because of their design; they remain premises. |
The Tribunal considered this authority but found the potato store performed active functions beyond mere premises. |
| Carr v Sayer [1992] STC 396 |
Buildings do not become plant simply by being purpose-built for a trading activity. |
The Tribunal acknowledged this but distinguished the potato store due to its active functional role. |
| Benson v Yard Arm Club Limited [1979] STC 266 (CA) |
A ship converted to a floating restaurant was not plant as it served only as premises. |
Referenced to illustrate that premises alone do not constitute plant; the potato store was found to be more than mere premises. |
| St John's School v Ward [1974] STC 69 |
Pre-fabricated buildings for specific uses did not constitute plant. |
Considered but distinguished on the basis of active function performed by the potato store. |
| Bradley v London Electricity plc [1996] STC 1054 |
Essential question is whether a structure is apparatus with which the business is carried on or merely premises. |
The Tribunal applied this test and found the potato store to be apparatus (plant) rather than mere premises. |
Court's Reasoning and Analysis
The Tribunal began by applying the statutory framework of the Capital Allowances Act 2001, focusing on whether the expenditure was on plant or machinery and whether the potato store qualified as a building or structure excluded from allowances unless it fell within certain exceptions (List C).
On the issue of plant, the Tribunal accepted the Appellant's evidence and submissions that the potato store performs an active, essential function in the Appellant's qualifying activity. It does not merely provide a setting but actively dries, cures, cools, and conditions potatoes to maintain their quality over an extended period. The structural elements and integrated machinery form a cohesive unit essential to this function. The Tribunal relied on established case law, notably Yarmouth v France and CIR v Barclay, Curle & Co Ltd, to conclude that the store qualifies as plant.
Regarding whether the store qualifies as a silo for temporary storage, the Tribunal considered dictionary definitions and persuasive authority from the May case. It rejected HMRC's narrow interpretation limiting "silo" to grain storage and "temporary" to very short periods such as seven days. The Tribunal found the store's use from September to July constituted temporary storage within the ordinary meaning of the term and that the structure fits the definition of a silo as a cylindrical or similar above-ground structure used for storing roots or similar crops.
On the cold store issue, the Tribunal found that the store operates by cooling potatoes to a temperature range between 6.5 and 11.5 degrees Celsius, sufficient to preserve them. It rejected the requirement for mechanical refrigeration, holding that the store functioned as a cold store despite relying on ambient air. The Tribunal found the objective temperature range met the statutory exception for cold stores.
Consequently, the Tribunal concluded that the expenditure qualified for capital allowances as plant and that the potato store fell within the exceptions for silos for temporary storage and cold stores under List C.
Holding and Implications
The Tribunal's final decision was to ALLOW THE APPEAL.
This means the Appellant is entitled to claim capital allowances on the expenditure incurred in constructing the potato storage facility, treating it as plant and machinery qualifying under the exceptions for silos for temporary storage and cold stores. The decision directly affects the parties by overturning HMRC's disallowance of the claimed allowances. No broader precedent beyond the persuasive authority cited was established, but the Tribunal emphasized the application of established legal principles to the specific facts of the case.