Identity Crisis

Tax Case

Identity Crisis

The Court of Appeal upheld the High Court's decision in favour of the Revenue in Shove v Lingfield Park 1991 Ltd.

THE TAXPAYER COMPANY claimed capital allowances in respect of an all weather race track. The Revenue refused the claim, saying that the track did not qualify as plant. The Court of Appeal supported the High Court saying that the track functioned as premises on which the trade of horse racing was carried out.

Background

The taxpayer company installed an artificial all weather race track at Lingfield Park Racecourse. The Inland Revenue refused the company's subsequent claim for capital allowances in respect of the track on the ground that it did not qualify as plant for the purposes of CAA 1990, s 24.

The company appealed to the General Commissioners. They allowed the claim saying the track had a separate identity from the real grass race track and buildings at Lingfield Park, that it functioned as plant rather than as part of the premises, and therefore it qualified as plant. The High Court allowed the Revenue's subsequent appeal, so the company appealed to the Court of Appeal.

(David Milne QC and Elizabeth Wilson for the company; Timothy Brennan QC for the Revenue.)

Judgment in the Court of Appeal

Lord Justice Mummery delivered the first judgment. He said that the appeal turned on whether the artificial all weather race track was plant within CAA 1990, s 24, but as no statutory definition of plant existed, the 'mass of judicial interpretation' remained relevant. The business use test and premises test laid down in these cases were a sound legal basis for deciding whether or not the artificial racecourse was plant or not. The judge said that the outcome of the case was of 'considerable interest to the whole of the modern leisure industry, as well as the Inland Revenue' because of the large amounts of money spent on all weather facilities.

The General Commissioners had found that the artificial track was not land in its natural state. Lord Justice Mummery agreed with this, saying that it was synthetic in nature and had a limited life, unlike land in its natural state. However, this did not preclude the track from functioning as premises in which the trade of horse racing took place. The artificial track in effect enlarged the racecourse, making more space available and allowing more frequent horse racing to happen.

The judge did not agree with the General Commissioners that the track had its own separate identity, saying it was no more separate from the grass track or other parts of the premises. Furthermore, the fact that the top surface of the artificial track could be removed and resold did not make it separate.

The judge dismissed the taxpayer's appeal. Lord Justice Scott Baker and Lord Justice Potter agreed, although Lord Justice Scott Baker said that he 'wavered' slightly during the judgment. He said were it not for the 'weight of authority about the meaning of plant', the argument that the General Commissioners' decision was one of fact and degree would be a strong one. However, this was not the case.

Decision for the Revenue

(Reported at [2004] STC 805.)

Commentary by Allison Plager

As Lord Justice Mummery said, Shove v Lingfield Park 1991 is an important case with ramifications for many organisations, including schools, which construct all weather sports facilities. Another similar case, CIR v Anchor International concerning synthetic five-a-side football pitches has recently been heard in the Court of Session, although the decision in that case was in favour of the taxpayer. That result could give hope to Lingfield Park if it decides to proceed to the House of Lords.

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