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Cite as: [2011] UKFTT 416 (TC)

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G Pratt & Sons v Revenue & Customs [2011] UKFTT 416 (TC) (24 June 2011)

[2011] UKFTT 416 (TC)





Appeal number TC/2010/08099


Re-surfacing of farm drive – Whether Capital or Revenue expenditure – Whether “entirety” of drive renewed – No – Appeal allowed – Section 33 Income Tax (Trading and Other Income) Act 2005 









G PRATT & SONS Appellant



- and -














Sitting in public at Keeble House, Southernhay Gardens Exeter EX1 on 16 May 2011



Charles Jenkinson of CJ Consultants for the Appellant


Peter Massey of HM Revenue and Customs, for the Respondents






1.       This is an appeal by G Pratt & Sons, a farm partnership, against an amendment to the partnership tax return made by HM Revenue and Customs (“HMRC”) on 11 May 2010 under s 28B of the Taxes Management Act 1970. This increased the partnership profit for 2007-08 by £37,286, from £12,244 to £49,530 on the basis that this related to expenditure which was capital in nature and therefore not allowable as a deduction in the accounts.

2.       Although negotiations, between HMRC and CJ Consultants (acting for the partnership), settled most of the disputed issues it was not possible to resolve the issue of whether re-surfacing the farm drive at a cost of £23,300 was a replacement or renewal of the drive, which is a capital expense and not deductible, or a repair which is a revenue expense and an allowable deduction. This is the sole issue before us.

3.       Section 33 of the Income Tax (Trading and Other Income) Act 2005 provides:

In calculating the profits of a trade no deduction is allowed for items of a capital nature.

In Lurcot v Wakely and others [1911-13] All ER Rep 41 at 49 Buckley LJ said:

“Repair is restoration by renewal or replacement of subordinate parts of a whole. Renewal as distinguished from repair is reconstruction of the entirety, meaning by the entirety not necessarily, but substantially, the whole subject matter under discussion.”

Donovan J, in Phillips (HM Inspector of Taxes) v Wheildon Sanitary Potteries Ltd (1952) 33 TC 213 at 220 quoted Lord Cave who had said in Atherton’s case, in regard to whether an item is in substance a revenue or capital expenditure:

“This appears to me to be a question of fact which it is proper to be decided by the [Tribunal] upon the evidence brought before them in each case.”


4.       We were provided with a bundle of documents which included a plan of the farm and photographs of the drive and farmyard together with correspondence between the parties. In addition we heard from Mr Pratt. On the basis on this evidence we make the following findings of fact:

(1)          The farm is family owned, having been in the same family since the 1880’s.  90% of the output is liquid milk, with the remaining 10% comprising beef, eggs and arable produce.

(2)        The working buildings of the farm are grouped around a farmyard at the end of the farm drive, which runs to the nearest public road.  Near the farmyard there is a branch of the drive running to the farmhouse. This is adjacent to, but separate from, the farmyard.


(3)        The drive is used by farm suppliers who deliver to the working buildings. In addition, it is used daily by a 20,000 litre milk tanker from the farm’s dairy customer to collect the output of liquid milk.  The milk is supplied to the dairy on contract, although the appellant was unable to confirm whether or not the contract placed requirements on him concerning the quality of access to be provided.

(4)        Liquid milk is held in holding tanks at the farmyard.  The tanks hold about 3,000 litres, which approximates to the daily output of the farm.  In order to collect the milk, the tankers need to be able to get to within about 30 feet of the holding tanks.

(5)        Originally the surface of the drive would have been stones laid on bare earth.  At some point this was covered by tarmac. The lane had last been tarmacked about 30 years before and this had deteriorated over time to the point where the local refuse collectors had refused to drive up it.

(6)        The work on the drive took three to four weeks and consisted of removing the top layer of tarmac until a stable sub-surface was reached, repairing the sub-surface as necessary, by using broken up pieces from the surface layers, and then re-surfacing.  New kerbing was added as necessary to bring the drive up to modern standards. The total length of the drive from the road to the farmyard is 280 metres, of which 239 metres were re-surfaced.  The section of drive from the fork to the farmhouse, 41 metres, was not re-surfaced.

(7)        For part of the time (whilst the concrete surface was drying) the drive could not be used by collection vehicles, and Mr Pratt, was obliged to drive tankers across the fields to the road to allow daily milk collections to continue.

(8)        The drive was not widened during the work, and its load bearing capacity was not increased.


5.       Mr Massey, for HMRC, who referred to the definition of “repair” and “renewal” by Buckley LJ in Lurcot v Wakely , submitted that, on the facts of this case, the farm drive should be regarded as an “entirety” in its own right and not part of the farm in the way that the new stand in Brown (HM Inspector of Taxes) v Burnley Football and Athletic Club Ltd (1980) 53 TC 357 had been regarded as an entity in its own right and not as an inseparable part of a stadium. He contended that the effect of concreting the drive and re-concreting part of the yard was to provide an entirely new and better surface than before and, as such, this case was one of those to which Donovan J had referred when he said in the Wheildon Sanitary Potteries case (at 220), “there can be cases where the work done may result in no improvement, but merely reinstatement, and yet be work involving capital expenditure on account of its size and importance.”

6.       Against this Mr Jenkinson emphasised that the new surface had been laid on top of the previous tarmac surface which had been broken up to fill potholes and create a hard-core base over the original stone which was then concreted over. He submitted that nothing new had been added to the drive.

Discussion and Conclusion

7.       In our view the circumstances of this case are very different from the situation in Wheildon Sanitary Potteries where an embankment of bricks and earth between a canal and a pottery factory had, due to subsidence, sunk below the water level causing water to seep through the factory walls leading to the construction of a completely new barrier on the same site as a replacement for the embankment.

8.       In this case, as Mr Jenkinson says, the work on the farm drive consisted of a new concrete surface being placed over the existing tarmac which had been broken up to form a hard-core base. There was not, in our judgment, a renewal of the entirety of the drive, or the part of the yard in which the concrete was replaced, but a repair to an existing asset. We may have taken a different view if the drive had been altered to accommodate larger milk tankers or to allow access for larger lorries bringing farm supplies but it was not. Before the work on the drive the dairy sent 20,000 litre tankers for milk collections and they continued to do so following its completion, the same applies to deliveries by suppliers to the farm.

9.       The appeal is therefore allowed.

10.    We were provided with a schedule showing a calculation of the revised profit for the partnership which included additions to the profit of £6,002 that had previously been agreed between the parties. Therefore, in accordance with s 50(6) of the Taxes Management Act 1970, we increase the amount contained in the partnership statement by £6,002 increasing the partnership profit to £18,246.

11.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.










Authorities referred to by the parties and not referred to in the Decision

Samuel Jones & Co (Devonale) Ltd v Commissioners of Inland Revenue (1951) 32 TC 513

Moonlight Textiles Ltd v HMRC [2010] UKFTT 500 (TC)

Van Den Berghs, Ltd v Clark (HM Inspector of Taxes) (1935) 19 TC 390

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