Dixon (HM Inspector of Taxes)
v
Fitch's Garage Ltd
England & Wales
Chancery Division
19 June 1975
The Respondent Company redeveloped the forecourt of its garage premises by providing new self-service pumps and storage tanks, and an office with a computer console, and by erecting a new canopy over the whole service area to provide adequate lighting and protection from the weather for the pumps, employees and customers.
The canopy, which was designed and built to the Respondent's requirements, was sectionalised and further sections could be added.
It consisted of an aluminium roof with fascia and cladding supported on four steel columns.
The steel columns were bolted to sunken concrete bases which were embedded in concrete islands.
The tops of the pillars were fitted to a steel frame by nuts and bolts. The only equipment mounted on the canopy was for lighting.
The Inspector of Taxes refused capital allowances on the cost of the canopy.
On appeal, the Company contended that the canopy formed an integral part of the petrol pump complex and was therefore plant employed in the business.
For the Crown it was contended that the canopy was the setting or part of the setting in which the business was carried on rather than the apparatus with which it was carried on.
The General Commissioners accepted the Company's contention and allowed the appeal.
Held, that the canopy did not have a functional purpose to enable the Company to perform the activity of supplying petrol to motor vehicles; it was merely part of the setting where petrol was supplied.
It merely provided shelter and played no part in "the commercial process".
The application of the functional test is dealt with by Brightman J in the following words:
“The proper test is whether the canopy had a functional purpose to enable the taxpayer company to perform the activity of supplying petrol to motor vehicles.
I ask myself:
“Does the canopy help to supply petrol”, or
"is it merely part of the setting where petrol is supplied"?
To use the words of Lord Reid, which I have already read, is the canopy part of the means by which the operation of supplying petrol is performed?
In my judgment this question admits only of a negative answer.
The petrol pumps would deliver petrol to vehicles whether or not there was a canopy overhead.
The canopy merely makes the business of supplying petrol more comfortable for motorists and the staff of the petrol station.
It does not help to deliver the petrol.
It is not part of the means by which it is supplied. It is not like the dock case, where the dock was useless without its operating machinery and vice versa or the silo case, where the silo and its contents were totally interdependent.
Further, there is a clear thread running through the recent cases including.
Australian cases referred to in the silo case, showing that a structure is not plant if its only purpose is to provide shelter and if it plays no part in what may be termed “the commercial process”.
That conclusion is, I think, an inevitable result of the application of the functional test.
Amenity Test is not a permissible test
In this difficult area of the law it is, in my view, important to stick to the established tests.
In his submissions to me the taxpayer’s Counsel sought to introduce a new test;
whether the item in question is commercially desirable; or
necessary to enable the taxpayer to sell his petrol to the best advantage.
That, to my mind, is an amenity test as distinct from a functional test, and is not a permissible test.
The right test is the Functional Test”.
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