Attwood (HM Inspector of Taxes)
and
Anduff Car Wash Ltd
This was an appeal by the Revenue from a decision of the special commissioners that the entire site on which stood a building incorporating car washing machinery and control equipment qualified as "plant" for the purposes of capital allowances.
Anduff's trade was operating some 78 car wash sites throughout the UK, each site extending to about 20 metres by 6.5 metres.
On each site was a "washhall" incorporating the car wash machinery and control equipment, and surrounding tarmac areas used for circulation, queuing and parking.
The wash hall had an unusually shaped roof which enabled rain water to be retained and, after going through settling tanks and filters, to be used again for washing cars.
The sites were laid out in accordance with a special German system known as the "IMO" system which allowed for a very rapid throughput of vehicles, with provision for four vehicles to pass through the wash hall at one time.
The IMO system encompassed the design and layout of the whole site.
The site included pre-wash and post-wash pads, and vacuum machines for drivers to clean the interiors of their cars if they wished.
The company claimed capital allowances on the full cost of each site as a single item of plant. The Inland Revenue rejected this: they accepted that some of the facilities would constitute plant and machinery but not the entire site.
The evidence was that the site was crucial to the car wash operation, ensuring that cars passed round the site through the washhall, and out again on one continuous conveyor belt.
Case Stated
On 20, 21, 22, 23, 26 and 27 April and 1 November 1993 two special commissioners (Mr THK Everett and Mr DA Shirley) heard the appeals of Anduff Car Wash Ltd ("Anduff") against seven assessments to corporation tax relating to accounting periods ended on 31 December 1984-1990 inclusive.
Two separate questions arose for decision in relation to the appeals and they were considered separately.
The first question concerned the status of the structures used by Anduff in its trade of operating car washes, claimed by Anduff to be plant; a claim rejected in large measure by the Inland Revenue.
The commissioners decided that question in favour of Anduff and issued a written decision in principle to that effect on 17 May 1993.
That decision set out the facts found on the evidence adduced and the commissioners' conclusions.
Subsequently, on 1 November 1993 the commissioners were asked to decide the date on which the expenditure on part of the plant comprising car washing equipment imported from Germany was incurred by Anduff.
That question was decided in favour of the Revenue.
Anduff did not appeal the supplementary decision on that point, issued on 22 November 1993.
Accordingly it was only the first decision dated 17 May 1993 which was under appeal.
Figures were not agreed between the parties until 5 August 1994 and on 12 August 1994 the commissioners adjusted the assessments accordingly.
The Revenue immediately after the determination of the appeals declared dissatisfaction therewith as being erroneous in point of law and on 24 August 1994 required a case for the opinion of the High Court to be stated pursuant to the Taxes Management Act 1970 section 56.
The question of law for the opinion of the court was:
whether the commissioners applied the correct principles laid down in the relevant authorities to the facts found in reaching the conclusion that each Anduff site is one single unit of plant within the provisions of the Finance Act 1971 and the Capital Allowances Act 1990.
The only trade of Anduff is that of operating car washes.
It does not sell petrol nor does it operate its facilities on the forecourts of garages or petrol filling stations.
Its car wash sites are free-standing, each site being approximately 20 metres long by 6.5 metres wide, which contains the car washing equipment imported from Germany.
Most of the remainder of each site is covered in tarmacadam or similar material and laid out with signs and bollards to ensure the smooth progress of customers' cars from the entrance, round the site, through the washhall and back to the entrance/exit.
Coin operated vacuum cleaners are also provided to enable customers to clean the interiors of their cars if they so wish, either before or after entering the washhall.
Judgement
HM Revenue and Customs (HMRC, a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support, the administration of other regulatory regimes including the national minimum wage and the issuance of national insurance numbers) accept that a car wash system will contain items that will certainly qualify as plant or machinery.
The point of the Anduff case, however, was that the company claimed that the entire car wash site should qualify as plant.
The company was successful in front of the special commissioners in May 1993 but the decision was overturned in the Chancery Division, and HMRC successfully gained confirmation of their view in the Court of Appeal in July 1997.
In reaching their decision that the entire ‘wash hall’ should qualify as plant, the commissioners had regarded it ‘not as a building but as a structure akin to a machine which takes into its large maw motor cars at up to four at a time, washes them thoroughly, dries them and ejects them’.
They decided that any protection from the elements provided by the hall was merely incidental.
The commissioners also noted the various special features of the structure including its unusually shaped roof designed to collect rainwater.
The courts, however, would have none of it.
In the Chancery Division, the judge decided that the commissioners had failed to apply the ‘Premises Test’.
The site on which the car wash business was operated, as well as the building in which the various items of machinery were housed; all constituted the premises within which the trade was carried on rather than the apparatus.
The Court of Appeal agreed with the judge in the Chancery Division.
In the Court of Appeal judgment, it was pointed out that only 130 square metres out of the total of 1,150 square metres were actually occupied by the wash hall.
The judge rejected outright the view of the commissioners that most of the site was designed and operated as a conveyor belt.
He concluded that it was impossible to describe the whole site as a single unit of plant.
The judge went on to consider whether the wash hall alone could be treated as one composite unit of plant.
Even there, however, he concluded that such a view was untenable.
The wash hall contained a lobby and WC, a pump room, an inspection area and a store.
As such, the judge concluded that ‘quite plainly the building functions as premises, housing the machinery’. He found it ‘impossible to say that the wash hall as a whole was apparatus functioning as plant’.
What this Means
It was held that an item used IN carrying on the business passes the “business use” test but is excluded as being plant if it use is as the premises FROM which the business is carried on.
Anduff’s appeal was dismissed as it was clear that part of the site were the premises from which the business traded.
The fact that aspects of the building e.g. the water-efficient roof, performed a function in the business would not lead the entire building to be treated as plant.
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