Court of Appeal upholds Upper Tribunal decision that gas cavities are not ‘plant’
The Proceedings
In Cheshire Cavity Storage 1 Limited AND EDF Energy (Gas Storage Hole House) Limited v HMRC [2022] EWCA Civ 305, the Appellants sought to claim capital allowances for the costs of creating underground cavities in which they stored gas as part of their gas storage business. Having reviewed the long line of cases on “plant”, the Court of Appeal rejected the Appellants’ argument that if an item performs any plant-like function that it necessarily qualifies as plant. The Court held that whether an item qualifies as plant is a question of fact and degree and requires an evaluative exercise. The Court held that the Upper Tribunal had not erred in asking whether it was “more appropriate to describe the item as apparatus for carrying on the business or as the premises in or upon which the business is conducted” (UT [54(8)]): in asking itself that question it was applying the “premises test”. The “premises test” was amply supported by authority. The Upper Tribunal’s answer to the question they posed (i.e. “premises test”) revealed no error of law and could not be disturbed.
Statutory Background
The Capital Allowances Act 2001 section 11 provides for allowances if a person carries on a “qualifying activity” and incurs “qualifying expenditure”. A trade is a “qualifying activity”. Expenditure is “qualifying expenditure” if it is capital expenditure on the provision of plant or machinery wholly or partly for the purposes of the qualifying activity carried on by the person incurring the expenditure. The question for the court to decide was whether the expenditure on creating the cavities by a process of leaching and de-brining was incurred on “the provision of plant”.
The term “plant” is not statutorily defined but has been considered by a long line of cases. The starting point is Yarmouth v France (1887) 19 QBD 647 where Lindley LJ stated:
“There is no definition of plant in the Act: but, in its ordinary sense, it includes whatever apparatus is used by a business man for carrying on his business,—not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business…”
Cases that have applied that that test include: Jarrold v John Good & Sons Ltd [1963] 1 WLR 214; IRC v Barclay Curle & Co Ltd [1969] 1 WLR 675; Cooke v Beach Stations Caravans Ltd [1974] 1 WLR 1398; IRC v Scottish and Newcastle Breweries Ltd [1982] 1 WLR 322; Wimpy International Ltd v Warland [1989] STC 273; Attwood v Anduff Car Wash Ltd [1997] STC 1167; Shove v Lingfield Park 1991 Ltd [2004] EWCA Civ 391, [2004] STC 805.
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