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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Urenco Chemplants Ltd & Anor v Commissioners for His Majesty's Revenue And Customs  EWCA Civ 1587 (01 December 2022)
Cite as:  EWCA Civ 1587,  WLR(D) 478,  BTC 37,  STC 54
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ON APPEAL FROM
THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
Mr Justice Mellor and Upper Tribunal Judge Thomas Scott
 UKUT 00022 (TCC)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE ARNOLD
SIR LAUNCELOT HENDERSON
| (1) URENCO CHEMPLANTS LIMITED
(2) URENCO UK LIMITED
|- and -
|THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS
Jonathan Bremner KC and Edward Waldegrave (instructed by the General Counsel and Solicitor to HMRC) for the Respondents (HMRC)
Hearing dates: 5 and 6 October 2022
Crown Copyright ©
Sir Launcelot Henderson :
a) to set aside the FTT's decision on the "provision of a building" issue (Ground 1);
b) to set aside the FTT's decision that (most of) the disputed assets did not, in principle, constitute "plant" for the purposes of section 11 of CAA 2001 (Ground 2); and
c) to conclude that the part of the disputed expenditure attributable to the walls and first floor slab of the vaporisation facility was "on the provision of" plant or machinery for the purposes of section 11 (Ground 3).
In granting permission to appeal, the UT said that in its view all these grounds "raise important points of principle of wider application".
i) The "cylinder handling facility" or "CHF". Tails arrive at the TMF in large cylinders transported by lorry. Once received, the cylinders are placed on cradles before being transported by an internal rail system to the vaporisation facility. Once emptied, the cylinders remain radioactive and are returned to the CHF to "cool down" for a period of 90 to 100 days.
ii) The "vaporisation facility". In this facility, full cylinders are heated in autoclaves and the Tails, in gaseous form, are extracted and transferred through a network of pipes to the kiln facility.
iii) The "kiln facility". This contains two kilns which carry out the deconversion process, producing uranium oxide in powder form and hydrofluoric acid.
iv) The "condenser facility". The hydrofluoric acid generated by the deconversion process is transferred to this facility, where it is refined to a liquid state in which it can be sold.
v) The "uranium oxide store" or "UOS". The uranium oxide generated by deconversion is loaded in powder form into steel storage containers, known as DV70s. These are transferred to the UOS, where they are stored for up to 100 years.
"In order to satisfy the safety objectives, it has been necessary to construct certain "safety significant structures". The purposes of safety significant structures are:
i) To provide radiation shielding, blocking the path of radiation, and/or
ii) To provide containment, preventing the release of radioactive particles, and/or
iii) To support machinery, equipment and various structures to ensure that they will continue to perform their safety functions in the event of a 1-in-10,000 year earthquake, known as "seismic qualification"."
"From the outside the various facilities comprising the TMF give the appearance of a single modern industrial type building albeit with different roof heights. The [cylinder handling facility] and the [uranium oxide store] give the appearance of being large warehouse type structures. This is the effect in part of the external cladding described below. It was a condition of the planning permission that the facilities have the appearance of a modern business park. The site is very close to local community facilities. Despite appearances, each of the facilities under consideration is structurally independent. The cladding can be removed and replaced."
"11 General conditions as to availability of plant and machinery allowances
(1) Allowances are available under this Part if a person carries on a qualifying activity and incurs qualifying expenditure.
(2) "Qualifying activity" has the meaning given by Chapter 2.
(3) Allowances under this Part must be calculated separately for each qualifying activity which a person carries on.
(4) The general rule is that expenditure is qualifying expenditure if –
(a) 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, and
(b) the person incurring the expenditure owns the plant or machinery as a result of incurring it.
(5) But the general rule is affected by other provisions of this Act, and in particular by Chapter 3."
(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on the provision of a building.
(2) The provision of a building includes its construction or acquisition.
(3) In this section, "building" includes an asset which –
(a) is incorporated in the building,
(b) although not incorporated in the building (whether because the asset is moveable, or for any other reason), is in the building and is of a kind normally incorporated in a building, or
(c) is in, or connected with, the building and is in list A.
Assets treated as buildings
1. Walls, floors, ceilings, doors, gates, shutters, windows and stairs.
2. Mains services, and systems, for water, electricity and gas.
3. Waste disposal systems.
4. Sewerage and drainage systems.
5. Shafts or other structures in which lifts, hoists, escalators and moving walkways are installed.
6. Fire safety systems.
(4) This section is subject to section 23.
22 Structures, assets and works
(1) For the purposes of this Act, expenditure on the provision of plant or machinery does not include expenditure on –
(a) the provision of a structure or other asset in list B, or
(b) any works involving the alteration of land.
Excluded structures and other assets
7. Any structure not within items 1 to 6 other than –
(a) a structure (but not a building) within Chapter 2 of Part 3 (meaning of "industrial building"),
(2) The provision of a structure or other asset includes its construction or acquisition.
(3) In this section –
(a) "structure" means a fixed structure of any kind, other than a building (as defined by section 21(3)), and
(b) "land" does not include buildings or other structures, but otherwise has the meaning given in Schedule 1 to the Interpretation Act 1978.
(4) This section is subject to section 23.
23 Expenditure unaffected by sections 21 and 22
(1) Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies.
(3) Sections 21 and 22 also do not affect the question whether expenditure on any item described in list C is, for the purposes of this Act, expenditure on the provision of plant or machinery.
Expenditure unaffected by sections 21 and 22
1. Machinery… not within any other item in this list.
4. Manufacturing or processing equipment;…
22. The alteration of land for the purpose only of installing plant or machinery.
"72. I accept that the disputed components in each facility are closely physically connected. To a large extent they support each other and work together in providing radiation shielding, containment and seismic qualification, or a combination of those three functions. These structures all have a separate visual identity, especially when they are considered without the cladding. In my view to a large extent each structure comprises a whole. Each structure can be described as a "safety significant structure" in its own right. Looking at each structure in turn:
(1) The items which comprise the [cylinder handling facility] can readily be seen to form a separate structure and to function as such. Mr Nicholson [one of Urenco's witnesses] described it as a monolith, by which he meant that the walls and roof act together to provide support and seismic qualification. The structures provide radiation shielding for the environment, and for operators within, and containment. It is seismically qualified as a whole. In my judgment it would be artificial to consider the raft slab, the walls, the roof or other components as having separate identities… The only exceptions to this are the internal radiation shield walls where seismic qualification is merely incidental to the purpose of shielding operators in the CHF; the raised platforms or plinths which perform a specific function of supporting rails at the correct height for transportation purposes; and the stairs and access platforms which are intended only to service the crane…
(2) The items which comprise the vaporisation facility can readily be seen to form a separate structure and to function as such. That structure includes the first-storey concrete box which Mr Nicholson also described as a monolith. The concrete box has a containment function, a shielding function and is seismically qualified as a whole. It would be artificial to consider the slabs, external walls and internal walls as having separate identities. The only exceptions to this are the stairs and access platform which are for the maintenance and inspection of equipment…"
Broadly similar conclusions were then reached in relation to the items comprising the kiln facility, the condenser facility and the uranium oxide store respectively.
The law on the meaning of "plant"
"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."
"It is important to notice the various discriminations which are stated or implied in this description. First, it excludes anything which is not used for carrying on the business. Secondly, it excludes stock-in-trade both expressly and because, although used for the purposes of the business, its use lacks permanence. Thirdly, it excludes things which are not "apparatus…goods and chattels, fixed or moveable, live or dead" or not employed in the business. This excludes the premises or place in or upon which the business is conducted.
Before going any further I must say something about the third distinction and the way in which the courts in subsequent cases have refined the boundary between plant and premises. The words "apparatus…goods and chattels, fixed or moveable, live or dead" might suggest that the distinction turns upon whether the item is a chattel or fixture on the one hand or a building or structure on the other. This was the view of the minority in the House of Lords in IRC v Barclay, Curle & Co Limited  1 WLR 675, 45 TC 221. But the majority held that even a building or a structure (in that case a dry dock) could be plant if it was more appropriate to describe it as apparatus for carrying on the business or employed in the business than as the premises or place in or upon which the business was conducted. By this test a swimming pool used in connection with the operation of a caravan park has been held to be plant, in Cooke (Inspector of Taxes) v Beach Station Caravans Ltd  1 WLR 1398, while conversely in Benson (Inspector of Taxes) v Yard Arm Club Ltd  1 WLR 347, a ship used as a floating restaurant, although a chattel, was held not to be plant because it was the place in which the business was conducted: see Lord Lowry in IRC v Scottish & Newcastle Breweries Ltd  1 WLR 322 at 333.
It will be seen, therefore, that although the three distinctions in Yarmouth v France… each involves a test which can be called functional, they are subtly different from each other. If the item is neither stock-in-trade nor the premises upon which the business is conducted, the only question is whether it is used for carrying on the business. I shall call this the "business use" test. However, under the second distinction, an article which passes the "business use" test is excluded if such use is as stock-in-trade. And under the third distinction, an item used in carrying on the business is excluded if such use is as the premises or place upon which the business is conducted. The fact that an item may pass the "business use" test but fail what I may call the "premises" test is central to this case."
"In the light of the authorities, the position appears to me to be this. There is a well established distinction, in general terms, between the premises in which the business is carried on and the plant with which the business is carried on. The premises are not plant. In its simplest form that is illustrated by Lord Lowry's example of the creation of atmosphere in a hotel by beautiful buildings and gardens on the one hand and fine china, glass and other tableware on the other. The latter are plant; the former are not. The former are simply the premises in which the business is conducted.
The distinction, however, needs to be elaborated, for present purposes, by references to Lord Lowry's further formulation, namely that the fact that different things may perform the same function of creating atmosphere is not relevant: one thing may function as part of the premises and the other as part of the plant. Thus, "something which becomes part of the premises instead of merely embellishing them is not plant except in the rare case where the premises are themselves plant." The latter part of those observations is a reminder that it is not sufficient to say that something is part of the real property. It can still be plant as the Barclay Curle and Beach Station Caravans cases show. Moreover, the test is not whether the item is a fixture. Central heating apparatus must, I think, be a plant. But there may be cases in which the degree of affixation is a matter to be taken into consideration."
"It is proper to consider the function of the item in dispute. But the question is what does it function as? If it functions as part of the premises, it is not plant. The fact that the building in which a business is carried on is, by its construction particularly well-suited to the business, or indeed was specially built for that business, does not make it plant. Its suitability is simply the reason why the business is carried on there. But it remains the place in which the business is carried on and is not something with which the business is carried on.
I would agree with Hoffmann J that the question is whether it would be more appropriate to describe the item as part of the premises rather than as having retained a separate identity."
"First,… plant carries with it a connotation of equipment or apparatus, either fixed or unfixed. It does not convey a meaning wide enough to include buildings in general. The premises whether an office or a factory or a warehouse or whatever, at which or in which a business is carried on would not normally be understood as intended to be embraced by the expression "machinery or plant".
Second, the expression "machinery or plant" is apt to include equipment of any size. If fixed, a large piece of equipment may readily be described as a structure, but that by itself does not take the equipment outside the range of what would normally be regarded as plant. The equipment does not cease to be plant because it is so substantial that, when fixed, it attracts the label of a structure or, even, a building.
Third, and this follows from the above, equipment does not cease to be plant merely because it also discharges an additional function, such as providing the place in which the business is carried out. For example, when a ship is repaired in a dry dock, the dock also provides the place where the repair work is carried out. That is no more than the consequence of the extensive size of a piece of fixed plant.
Fourth, and conversely, buildings, which I have already noted would not normally be regarded as plant, do not cease to be buildings and become plant simply because they are purpose-built for a particular trading activity. Such a distinction would make no sense. Thus, the stables of a racehorse trainer are properly to be regarded as buildings and not plant. A hotel building remains a building even when constructed to a luxury specification… Similarly with a hospital for infectious diseases. This might require special lay-out and other features but this does not convert the buildings into plant. A purpose-built building, as much as one which is not purpose-built, prima facie is no more than the premises on which the business is conducted.
Fifth, one of the functions of a building is to provide shelter and security for people using it and for goods inside it. That is a normal function of a building. A building used for those purposes is being used as a building. Thus a building does not partake of the character of plant simply, for example, because it is used for storage by a trader carrying on a storage business. This remains so even if the building has been built as a specially secure building for use in a safe-deposit business. Or, one might add, as a prison. "
(a) Gray (Inspector of Taxes) v Seymours Garden Centre (Horticulture)  STC 706 (CA), 67 TC 401, (a "planteria" at a garden centre);
(b) Bradley (Inspector of Taxes) v London Electricity plc  STC 1054 (Blackburne J), (an underground electricity substation);
(c) Attwood (Inspector of Taxes) v Anduff Car Wash Ltd  STC 1167 (CA), (a car wash hall); and
(d) Shove (Inspector of Taxes) v Lingfield Park 1991 Ltd  EWCA Civ 391,  STC 805, (an all-weather race track at a racecourse).
"It seems to me that every part of this dry dock plays an essential part in getting large vessels into a position where work on the outside of the hull can begin, and that it is wrong to regard either the concrete or any other part of the dock as a mere setting or part of the premises in which this operation takes place. The whole dock is, I think, the means by which, or plant with which, the operation is performed."
(a) the decision of the High Court of Australia (McTiernan J, apparently sitting at first instance on appeals against assessments of income tax) in Wangaratta Woollen Mills Ltd v Federal Commissioner of Taxation  119 CLR 1, holding that the taxpayer company's dyehouse (with the important exception of its walls and roof) formed an item of "plant" within the relevant Australian statute;
(b) the decision of the Court of Appeal of Northern Ireland in Schofield (Inspector of Taxes) v R & H Hall Ltd  NI 12,  STC 353, holding that grain silos, viewed as a whole, qualified as plant; and
(c) the decision of Megarry J in Cooke v Beach Station Caravans Ltd  1 WLR 1398, 49 TC 514), holding that a swimming pool constructed at a caravan park was properly to be regarded as a single unit which qualified as plant.
"I am of opinion that the appellant's dyehouse is "in the nature of a tool" in the trade and does "play a part" itself in the manufacturing process. It is much more than a convenient setting for the appellant's operations. It is an essential part in the efficient and economic operation of the appellant's business. The complex ventilation system including the cavity wall does more than merely clear the atmosphere. Its structure is an active tool in preventing spoiling of material, and in enabling the operatives to carry out their tasks. It would be completely unnecessary in almost every other industry and quite useless to any buyer except a dyer. The protective coatings and tiling are essential in preserving the whole "tool". It is as unreal to dissect the paint or tile from its foundation as it is to separate the paint from a workman's tool of trade. The drains do not just remove waste liquids, they remove volatile liquids which would disrupt the process as much as vapours escaping from the vats. If boiling liquids were left uncovered in the building, in vats or drains the whole process would quickly become unworkable. I think therefore that the dyehouse should be regarded as a single unit of plant and not a collection of bricks, mortar, paint, timber etc, each of which is to be separately examined. It is not merely a special factory; it is a complex whole in which every piece is essential for the efficient operation of the whole. I would however except from the description of "plant" what might be referred to as the external "cladding" of the dyehouse, that is the external walls including the single walls at the east and west ends and the roof as distinct from the ceiling, but not the controlled louvres or the cowlings in the roof. The cladding really does nothing more than exclude the elements; and, whilst I am not convinced of the validity of this distinction, nevertheless it is clearly supported by prior decisions on this sort of question. "
"McTiernan J… held that a dye-house was a complex whole of which every piece was essential for the efficient operation of the whole and was plant, save for the external walls and roof which served only to provide protection against the elements. Again, as it seems to me, that structure with that significant exception passed the premises test.".
"whether the taxpayers are entitled to capital allowances in respect of the expenditure incurred on the introduction of water into salt bearing rock so as to dissolve the rock and create an impervious cavity, typically in the shape of a teardrop ("leaching"), and the displacement of the resulting brine by the introduction of gas ("de-brining") so as to permit the storage of gas in the cavity."
"In order to qualify for capital allowances, the expenditure must be expenditure on the provision of plant. It is clear from the authorities that a decision whether something is or is not plant is a question of fact or a question of fact and degree. In some cases, it is possible to take either view, and in such a case the decision of the fact-finding tribunal cannot be impugned. Since the question whether something is or is not plant is a question of fact, or a question of fact and degree, it is necessary to pay close attention to the facts of previous cases. In some cases the court has upheld the decision of the fact-finding tribunal on the basis that it was entitled to find as it did. In such a case, it does not follow that the fact-finding tribunal would have made an error of law if it had decided the question differently."
"84. Whether it is "more appropriate" to describe the item as apparatus or premises is clearly a value judgment. As Jacob LJ said in Procter & Gamble UK v Revenue and Customs Commissioners  EWCA Civ 407,  STC 1990, at :
"Often a statutory test will require a multi-factorial assessment based on a number of primary facts. Where that is so, an appeal court (whether first or second) should be slow to interfere with that overall assessment – what is commonly called a value-judgment."
85. Similarly, in Re Sprintroom Ltd, Prescott v Potamianos, Potamianos v Prescott  EWCA Civ 932,  2 BCLC 617,  BCC 1031 this court said at :
"So, on a challenge to an evaluative decision of a first instance judge, the appeal court does not carry out a balancing task afresh but must ask whether the decision of the judge was wrong by reason of some identifiable flaw in the judge's treatment of the question to be decided, "such as a gap in logic, a lack of consistency, or a failure to take account of some material factor, which undermines the cogency of the conclusion"."
"When an asset has both plant and premises/setting functions, the asset should be classified as plant unless it is merely premises/setting. It is not a question whether the asset predominantly performs a premises function rather than a plant-like function. Nor it is a question whether an asset is more appropriately described as premises or setting on the one hand, or plant on the other. As soon as it is found that an asset has any plant-like function, it qualifies as plant without more, unless it is specifically excluded by legislation."
"I do not find in the authorities solid support for Mr Peacock's submission that if something performs any "plant-like function" it is necessarily plant. On the contrary it is a question of fact and degree; that is to say an evaluative exercise. One applicable test in performing that exercise is "the premises test" as formulated by Hoffmann J. "
It will be recalled that, in Wimpy, Hoffmann J had formulated the premises test, by reference to the dry dock in Barclay, Curle, in terms of whether "it was more appropriate to describe it as apparatus for carrying on the business or employed in the business than as the premises or place in or upon which the business was conducted" (emphasis supplied).
HMRC's Ground 2: was the disputed expenditure incurred on "the provision of plant" within the meaning of section 11 of CAA 2001?
(a) The decision of the FTT
"… that the structures of the kiln facility and the condenser facility operate as plant, together with the various plinths identified. Otherwise the structures and disputed assets are merely part of the setting in which the plant and machinery functions and are not plant."
"(1) Plant can comprise large structural items.
(2) There is a distinction to be made between a structure which is merely the setting in which a trade is carried on and a structure which constitutes the apparatus with which the trade is carried on.
(3) The function of plant in a trade can be active or passive. For example, moveable partitioning might be said to perform its function passively but it may still be plant.
(4) Premises do not fall to be regarded as functioning as plant simply because they have been designed to satisfy the particular requirements of the business in question.
(5) A structure which is merely the setting in which a business is carried on is not plant.
(6) If a structure is both the setting and the means by which the business is carried on then it will be plant.
(7) An item that might otherwise be described as a building is likely to be a place in which the business is carried on and not plant, but not necessarily so.
(8) It is important to be careful and precise in analysing the function of the item for the purpose of distinguishing premises from plant."
"It may be described as the deconversion of Tails so as to produce and store uranium oxide and to produce hexafluoric acid for sale as an industrial material. All the processes carried out at the TMF are directed towards those ends."
There is no challenge by either side to this description of Urenco's trade.
"I consider that the safety functions of shielding, containment and seismic qualification are properly viewed as part of the setting in which the trade is carried out. Shielding and containment are akin to preventing noxious fumes or odours escaping from a processing plant. In Wangaratta the dyehouse and the apparatus within it were treated as a complex whole in which every element including the structure was essential for the efficient operation of the whole. The structure did not just provide the setting but was part of the dyeing process, removing volatile gases and liquids which would otherwise adversely affect the dyeing process. That is not the case here. The safety significant structures provide a safe setting for the processes to be carried out. Without the structures the actual processes could be carried on efficiently, although I accept that is entirely theoretical because the regulatory environment would not permit it to happen. But the regulatory environment is not in my view relevant to whether an asset performs a function in the trade. It cannot be said that in providing shielding and/or containment the structures have any function in the actual processing of Tails which is carried out by the plant and machinery in the TMF.
96. As far as seismic qualification is concerned, in a sense it is incidental to ensuring the integrity of the shielding and containment functions of each facility. It represents the standard and method of construction required to maintain shielding and containment in an extreme seismic event."
"I do not accept that argument. In my view the expenditure cannot be regarded as part of the cost of installation of the plant and machinery within the structures merely because that plant and machinery could not safely be used without it."
"(1) The functions of the CHF structure are shielding and containment of radioactivity. It has the appearance of a building, with four walls and a roof enclosing a substantial volume of space. The walls and roof are not required or intended to provide shelter for material, equipment, machinery or operators. The roof cladding is intended to provide shelter, not for the items inside the CHF but for the concrete roof that would otherwise be damaged by the effects of standing rainwater. In my view the shielding and containment functions are functions of premises and not functions in processing the Tails. The structure is purpose built to house the plant and machinery required to carry out the processing of the Tails. Such a structure would not sensibly be used in any other context but fundamentally it simply provides a safe and secure setting in which the Tails are processed. It is not part of a complex whole in the same way that the dyehouse was in Wangaratta."
"(7) The functions of the kiln facility structure are containment, support for the kiln, the hopper and associated equipment, and enabling the use of gravity to receive uranium oxide in the basement and thereafter to use a hopper for packing the uranium oxide. It provides shelter to the equipment and operators within, which is a function of premises, although this is incidental to the functions described above. It seems to me that this structure is not just specifically designed as the setting for plant and equipment within it, but also to hold items of equipment at specific levels to take advantage of gravity in the process of deconversion and the packing of uranium oxide. As such, I consider that it does fulfil a function in a similar way to the grain silos in Schofield and the dyehouse in Wangaratta. I am satisfied that it falls within the common law meaning of plant."
"The UOS is used for storage of uranium oxide and by analogy with what was said in Carr v Sayer, a structure does not take on the character of plant simply because it is used for storage by a trader carrying on a storage business, even where that storage business is highly specialised."
(b) The alleged errors of law in the decision of the FTT
"(1) The [FTT] Decision misclassifies the safety functions of assets used in shielding, containment and seismic qualification as being merely "part of the setting", as opposed to being assets used in the business and having plant-like functions."
See the UT Decision at .
"we consider that the FTT misunderstood or misapplied the functionality test at  when it concluded in setting out its reasoning that (1) without the safety significant structures the actual processes carried on at the TMF could still be carried on efficiently, although that was entirely theoretical because the regulatory environment would not permit it to happen, and (2) the regulatory environment was not relevant to whether an asset performed a function in the trade."
"82. We agree that the FTT recognised the applicable regulatory regime. We accept that the weight to be given to that factor in making the functionality assessment was a matter for the FTT. We also think that the FTT were right to observe that performance of a safety function cannot convert an item which is merely premises into plant. However, we think that the error into which the FTT fell was essentially to confuse the relevance of the regulatory/safety aspects in assessing the functionality of the Disputed Items with their relevance to the nature of the business in which functionality was to be assessed. That was what led it to state that without the safety structures the relevant processes "could still be carried out efficiently", when in fact the effect of the regulatory constraints was that those processes – and therefore the relevant business which Urenco in fact carried on – could not permissibly be carried out at all."
83. The same confusion lies behind the FTT's assertion that "the regulatory environment is not… relevant to whether an asset performs a function in the trade". We observe that here the FTT is going much further than Mr Bremner's assertion (with which we agree) that a safety function cannot convert premises into plant; it is saying that the safety function is simply not relevant, and so presumably should be given no weight. In any event, the critical point is that if the trade is itself shaped and determined by the regulatory environment, then that environment must necessarily be relevant to assessing functionality "in the trade"."
"84. We also accept the force of Mr Peacock's argument that in its essential reasoning the FTT appears to concentrate unduly in determining functionality on the "actual processing" carried out at the TMF.
85. It is not clear whether the FTT's focus on processing and "actual processing" amounts to, or stems from, a failure to apply the principle established by case law… that the function of plant may be active or passive. If so, that would be an error of law. We think it is more likely that it results from the drawing of a false dichotomy between items used in activities which might be said to be "actively" involved in processing Tails at the TMF and those which enable the carrying on of the entire range of activities in compliance with regulatory requirements.
Reading the FTT's critical reasoning in the context of the decision as a whole, we consider that the FTT did adopt an approach to functionality which assumed that an item falling within the latter category was indeed as a result less plant-like and more like premises. Particularly given the nature of Urenco's business activities at the TMF, we consider that this was an error, as it misunderstood or misapplied the relevant principles as applicable to those activities as actually carried on."
"86. The approach by the FTT which we have described also informed its conclusion that, contrary to Mr Peacock's submissions, Wangaratta actually supported its decision that most of the items were not plant. If the FTT had adopted the correct approach, a much closer comparison to the "complex whole" in that case would in our view have been called for. Even if Mr Bremner is correct that in principle containment and safety are typical functions of premises, these were not typical premises and this was not a typical trade."
"In this way, the FTT disregarded the regulatory framework of the nuclear industry and confined "Plant" to those assets which would be involved, in an entirely theoretical world, in the actual processing of Tails to the exclusion of assets that provided for the only safe way of processing Tails in the real world. This is wholly unrealistic; the determination of whether an item has a "plant-like" function must be determined in the real world, reflecting actual use in what was the only permitted operating environment."
(a) examining a hypothetical trade which could never have existed in the real world, instead of the actual trade carried on by Urenco; and
(b) treating the "regulatory environment" as irrelevant to whether an asset performs a function in the trade.
"Such a structure would not sensibly be used in any other context but fundamentally it simply provides a safe and secure setting in which the Tails are processed. It is not part of a complex whole in the same way that the dyehouse was in Wangaratta".
Similarly, the vaporisation facility structure was "essentially a concrete box which provides a setting for the autoclaves and associated equipment", while the shielding and containment functions of the uranium oxide store, together with its steel roof cladding to enable humidity control, were "functions of premises rather than functions in the processing of Tails": see (5) and (14).
(a) distinguishing Wangaratta, on the basis that the dyehouse and apparatus within it were treated as a single complex whole in which all the elements inter-related;
(b) making the point that, in the present case, a distinction could be drawn between the safety significant structures which provide a setting for the processes to be carried out, and the actual processes themselves which (safety considerations apart) would not need a specialised setting; and
(c) making the further point that the actual processing of Tails is carried out by the specific items of plant and machinery contained in the facilities (such as the crane, crane beam and cylinder cradles in the cylinder handling facility, the autoclaves and other processing equipment in the vaporisation facility, and the crane and dehumidifier equipment in the uranium oxide store). When the FTT said that "the regulatory environment was not relevant to whether an asset performed a function in the trade", it cannot have overlooked the obvious point that the regulatory environment explained the need for the safety significant structures within which the processing operations were carried out. I think the FTT was simply saying that the regulatory requirements had to be satisfied in one way or another, but the method chosen would not necessarily help in answering the question whether the asset performing that function did so as premises or as plant fulfilling a trade function.
HMRC's Ground 3: the walls and first-floor slab of the vaporisation facility
"The function[s] of the vaporisation facility structure, excluding the upper steel storey and the ground floor lean-to, are shielding and containment. It is essentially a concrete box which provides a setting for the autoclaves and associated equipment. It also provides shelter for the autoclaves which were not designed for outside use, although they could have been. Looking at the structure as a whole, its functions are essentially the functions of premises rather than functions in the processing of Tails. The walls and first-floor raft slab also provide support for pipework necessary for the processing of Tails. In my view that is also essentially a premises type function. As with the [cylinder handling facility], I regard the vaporisation facility as part of the setting in which the Tails are processed. I do not accept that it can be regarded as expenditure to make the plant in the facility usable".
"So, the question is whether, if the dock is plant, the cost of making room for it is expenditure on the provision of the plant for the purposes of the trade of the dock owner. In my view, this can include more than the cost of the plant itself because plant cannot be said to have been provided for the purposes of the trade until it is installed: until then it is of no use for the purposes of the trade. This plant, the dock, could not even be made until the necessary excavating had been done. All the Commissioners say in refusing this part of the claim is that this expenditure was too remote from the provision of the dry dock. There, I think, they misdirected themselves. If the cost of the provision of plant can include more than the cost of the plant itself, I do not see how expenditure, which must be incurred before the plant can be provided, can be too remote."
"The excavation was a necessary preliminary to the construction of the dry dock and, in my view, was covered by the provision of plant under Section 279. "Provision" must cover something more than the actual supply. In this case it includes the excavation of the hole in which the concrete is laid".
See too the speech of Lord Donovan at 691.
"The words "expenditure on the provision of" do not appear to me to be designed for this purpose. They focus attention on the plant and the expenditure on the plant, not limiting it necessarily to the bare purchase price, but including such items as transport and installation, and in any event not extending to expenditure more remote in purpose. In the end the issue remains whether it is correct to say that the interest and commitment fees were expenditure on the provision of money to be used on the provision of plant, but not expenditure on the provision of plant and so not within the subsection".
"The FTT held that the Vaporisation Facility itself was not plant, on the basis that it was part of the setting. It is not made explicit whether the FTT's decision in relation to the supporting walls and slab was reached on the basis that they were not plant, or on the basis that the expenditure was not on the provision of plant. However, the rejection of Mr. Peacock's argument that the expenditure qualified as it was to make plant usable strongly indicates that it was reached on the latter basis. On that basis, we consider that the FTT's reasoning indicates that it misdirected itself as to the law, because the fact that the walls and slab themselves performed a premises type function was not material to whether expenditure on those items was on the provision of plant. If the expenditure fell within the principles we describe above, then the fact that the expenditure happened to result in physical items which performed a premisses function would not render it ineligible. Of course, because the FTT did not consider that the Vaporisation Facility was itself plant, it would follow that no expenditure on its provision would itself qualify (unless it could be shown to be on the provision of some other item of plant). Nevertheless, we consider that the FTT made an error of law…. in reaching its decision in relation to the walls and slab".
"I regard the vaporisation facility as part of the setting in which the Tails are processed. I do not accept that it can be regarded as expenditure to make the plant in the facility usable".
The final sentence indicates that the FTT was well aware of the line of authority upon which Urenco relies. Indeed, at  the FTT had said it was common ground that expenditure "on the provision of" plant includes installation costs, referring to Ben-Odeco and quoting the passage in Lord Wilberforce's speech which says that items such as transport and installation are included, but not "expenditure more remote in purpose". In short, HMRC submit that the FTT's conclusion was one of fact, or alternatively a value judgment, which (in either case) it was fully entitled, and indeed correct, to reach.
"The fact that features of the structure were carefully designed to accommodate the equipment within does not convert what is otherwise plainly the premises in which the activity is conducted into the plant or apparatus with which that activity is conducted".
The facts of the present case are in my opinion very far removed from the examples given in the authorities of parasitical expenditure which qualifies for allowances because it is incurred in installing an item of plant or otherwise enabling it to function.
HMRC's Ground 1: was the disputed expenditure "on the provision of a building" within section 21(1) of CAA 2001?
"Clause 110 introduces a schedule containing new rules which provide that buildings, structures or land, with certain exceptions, cannot qualify for capital allowances as plant or machinery. These new rules are not intended to change the treatment of assets that qualify as plant at present, as a result of court rulings. The intention behind the legislation is to clarify and strengthen the boundary between buildings and structures on the one hand, and plant on the other. The boundary has been eroded over the years by a number of court cases which have reclassified certain expenditure on buildings and structures as being expenditure on plant. That has affected Exchequer receipts and has created uncertainty about where the boundary lies".
(b) The meaning of "building" in section 21
"one of the functions of a building is to provide shelter and security for people using it and for goods inside it. That is a normal function of a building. A building used for those purposes is being used as a building. Thus, a building does not partake of the character of plant simply, for example, because it is used for storage by a trader carrying on a storage business. This remains so even if the building has been built as a specially secure building for use in a safe-deposit business. Or, one might add, as a prison".
So, the provision of shelter and security are typical features of a building, and as Sir Donald Nicholls also observed (ibid):
"A purpose-built building, as much as one which is not purpose-built, prima facie is no more than the premises on which the business is conducted".
"21. On behalf of the Secretary of State, Mr Swift contended that a structure could only be a "building" within the Act if it was "an inclosure of brick or stonework, covered in by a roof". This contention was supported by three arguments, namely (i) the view of Lord Esher MR in Moir v Williams  1 QB 264, 270 that this was "what is ordinarily called a building", (ii) the desirability of having a clear and simple meaning for the word, as breach of the Act would be a criminal offence, and (iii) the need to ensure that cremations could not be seen by the general public. I turn to consider those three arguments in turn.
22. The first argument is based on the normal meaning of the word "building". The meaning of the word "building", or, to put the point another way, determining whether a particular structure is a "building", must depend on the context in which the word is used. Interpreting a word in a statute or a contract, or indeed in any other document, can, of course, only be sensibly done by considering the context in which it is being used. However, where, as is the case here, the word is one which is used in ordinary language and has no established special legal or technical meaning and is not defined in the document in question (in this case, the Act), one can usefully take as a starting point the word's ordinary meaning.
24. Particularly as it appears that Lord Esher's statement as to the "ordinary" meaning of the word "building" may be treated as some sort of authoritative guidance as to the normal meaning of the word, I take this opportunity to say that it would be wrong to see it as having any such effect. In my opinion, the word "building" in normal parlance is naturally used to describe a significantly wider range of structures than would be included within Lord Esher's "inclosure of brick or stonework, covered in by a roof".
25. There are many wooden or other structures not made of "brick or stonework", such as chalets, stables, or industrial sheds, and there are many structures which are not "inclosures", such as wood-drying stores, bandstands, or Dutch barns, all of which, on the basis of the normal use of the word, are "buildings". Other structures come easily to mind, such as the pyramids or the colosseum, which are buildings in normal parlance, but do not fall within Lord Esher MR's "ordinary" meaning. So, too, at least some prefabricated structures, particularly if attached to a concrete, or similar base, are naturally described as buildings.
26. Deciding what a word means in a particular context can often be an iterative process, and the ultimate decision should not be affected by whether one starts with a prima facie assumption as to the meaning of the word and then looks at the context, or one starts by looking at the context and then turns to the word. However, if one approaches the issue by making a preliminary assumption as to the meaning of a word such as "building", then, in agreement with what Etherton LJ said in argument, I do not think that it would be right to take a somewhat artificially narrow meaning of the word, and then see whether the context justifies a more expansive meaning. It is more appropriate to take its more natural, wider, meaning and then consider whether, and if so to what extent, that meaning is cut down by the context in which the word is used".
"At least in general, it appears to me that, both in principle and in practice, it is inappropriate for the court to seek to define a word or expression used in a statute, where the legislature has not done so. It would virtually be a judicial encroachment onto the legislative function. Judicial guidance on such an issue, through the court's reasoning in a case where the meaning of a word is in issue, is inevitable, and, it is to be hoped, helpful. But a conscious and unnecessary definition of the word by the court is another matter".
(c) The decision of the FTT
"104. Mr Peacock submitted that the term "building" is an ordinary English word which must be defined within its particular context and against the relevant statutory background. In that sense he submitted that it was a "flexible term". He noted that it was implicit in s22 that whilst a building is a fixed structure, not all fixed structures are buildings. He submitted that the typical functions of a building are to provide shelter and security to person or things contained within. However, he submitted that not all structures which provide shelter are buildings, giving the example of the grain silos in Schofield where shelter and security were not the sole or main functions of the structure. A further example in a different statutory context related to stone walls known as beals built in the middle of fields to shelter sheep (Morrison v IRC  1 KB 716)."
"It is quite clear that the expression "buildings" does not mean everything that can by any means be described as built; it means buildings in a more narrow sense than structures, because there are other structures of a limited class which under the terms of the sub-section may also be taken into consideration. In my judgment, as a more or less limited sense has to be placed upon the word "buildings", - a sense limited in the direction which I have indicated - the only way to construe it is by looking at the nature of the property which is being dealt with. It is impossible to hold that the question whether a thing is or is not a building depends solely on the character of the workmanship that is put into it…. The character of the erection and the nature of the property on which it is and its function on that property must all be looked at."
Rowlatt J concluded that the walls in question were not "buildings", in a statutory context which, like ours, drew a distinction between buildings and structures.
"I agree with Mr Peacock that the function of a structure will be a factor, but is not determinative. The inherent characteristics of a structure must be seen in the context of the function of the structure. Those functions might include providing shelter and security. The common law test for plant considers the function of the asset, in particular its function in the trade. Section 21 in my view requires consideration of the nature and characteristics of a structure including whether or not the functions it is intended to perform are typical functions of a building".
"The Vice Chancellor gave the example of a prison, but depending on the trade one might also wish to keep noise, dangerous fumes or other material or unpleasant odours contained. In one sense a building might be designed and function to keep people, animals or things in, as much as to keep the elements or other things out.
110. On Mr Peacock's case, the question of whether a structure is a building only arises once it has been determined that it satisfies the common law definition of plant. As such it must be treated as having a plant-like function in the trade and one then looks to see whether it also functions as a building. However, in my view it is not solely a question of how the structure functions. It is also a question of the characteristics of the structure. For example, does it have the form of a building? A structure which has four walls and a roof might naturally be described as a building, whatever specialist function it might have in any trade".
"115. The CHF has four walls and a roof and encloses a substantial volume of space. The roof cladding protects the shield roof from the elements, namely standing rainwater. Otherwise, the roof and walls are not intended to provide shelter to material, equipment, machinery or operators inside the CHF. The walls and roof contain radiation inside the structure protecting the environment and the people outside. In my view the CHF does have the inherent characteristics of a building, namely it has walls and a roof. It also functions as a building in containing things. When one looks at the CHF, with or without the cladding, it looks like a building. Overall, I consider that in everyday terminology it is naturally described as a building.
116. The internal radiation shield walls and the stairs and access platforms are connected with the building and are properly viewed as walls, floors and stairs within List A. As such, expenditure on those items is treated as expenditure on a building. The raised platforms or plinths are in my view incorporated in the building and by virtue of s21(3)(a) expenditure on those items cannot [be] treated as expenditure on plant".
Urenco's cross-appeal, ground 1: Items 1 and 4 of List C
"(3) Sections 21 and 22 also do not affect the question whether expenditure on any item described in List C is, for the purposes of this Act, expenditure on the provision of plant or machinery".
Accordingly, the expenditure which is to be unaffected by sections 21 and 22 is described as expenditure "on any item" contained in List C, and the saving effect is achieved by saying that sections 21 and 22 "do not affect the question" whether such expenditure is, for the purposes of CAA 2001, "expenditure on the provision of plant or machinery". The final words take the reader back to the basic test in section 11(4), and repeat its composite wording, thus making clear that inclusion in List C does not alone guarantee the availability of capital allowances. The basic test in section 11(4) must still be satisfied.
"3. The main purpose of the Capital Allowances Act is to rewrite tax legislation relating to capital allowances so as to make it clearer and easier to use.
4. The Act also makes some minor changes to the legislation. These are within the remit given to the Tax Law Rewrite Project and the Parliamentary process for the Bills it produces".
"169. This section is based on column 2 of Table 1 in paragraph 1, column 2 of Table 2 in paragraph 2 and paragraph 1(3) of Schedule AA1 .... It also makes two minor changes."
"174. Subsection (4) includes List C. This is made up from column 2 from both Table 1 and Table 2 of Schedule AA1 to CAA 1990. It also includes the items in paragraph 1(3).
175. The merger of the columns involves a minor change. In Schedule AA1 the columns apply differently:
- whether a building is plant is unaffected by the Schedule for assets in column 2 of Table 1;
- whether a structure is plant is unaffected by the Schedule for assets which are within either column 2 of Table 1 or column 2 of Table 2 (paragraph 2(3) of Schedule AA1 provides this rule).
176. Merging the Tables in this Act in principle increases the range of expenditure on buildings which is unaffected by the exclusion of buildings from the definition of plant. See Change 2 in Annex 1."
"Sections 21 to 23 are based on Schedule AA1 to CAA 1990. But they differ from the Schedule in that they simplify and extend the provisions about what items are treated as unaffected by the express exclusions from what can be plant or machinery.
Schedule AA1 was inserted in CAA 1990 by section 117 of FA 1994 against the background of burgeoning case law extending the meaning of "plant". The Schedule was intended, so far as practicable, to call a halt to this process. In general terms, it contains provisions excluding things from being machinery or plant and other provisions about things that are unaffected by the exclusions.
An extension of the provisions treating items as "unaffected" by the express exclusions therefore means that more items can be treated as plant or machinery. This in turn favours the taxpayer, by potentially extending the range of circumstances in which the taxpayer may obtain plant and machinery allowances.
In more detail, list C in section 23 merges column 2 of Table 1, column 2 of Table 2 and paragraphs 1(3)(b) to (e) and 5(2) of Schedule AA1 into a single list of items that are unaffected by the express exclusions in sections 21 and 22.
This changes the literal effect of paragraphs 1(3) and 2(3) of Schedule AA1. Paragraph 1(3) treats the question whether expenditure on the items in paragraphs (b) to (e) is expenditure on plant or machinery as unaffected by paragraph 1(1) only. Paragraph 2(3) treats the items in column 2 of Table 2 as unaffected by paragraph 2(1) only".
"1(1). For the purposes of this Act expenditure on the provision of machinery or plant does not include any expenditure on the provision of a building.
(2) For the purposes of this Schedule "building" includes any asset in the building –
(a) which is incorporated into the building, or
(b) which, by reason of being movable or otherwise, is not so incorporated, but is of a kind normally incorporated into buildings;
and in particular includes any asset in or in connection with the building included in any of the items in column 1 or column 2 of the following Table ("Table 1").
(3) Sub-paragraph (1) above does not affect the question whether expenditure on the provision of –
(a) any asset falling within column 2 of Table 1,
… is for the purposes of this Act expenditure on the provision of machinery or plant".
"2. (1) For the purposes of this Act expenditure on the provision of machinery or plant does not include any expenditure on –
(a) the provision of structures or other assets to which this paragraph applies, or
(b) any works involving the alteration of land.
(2) This paragraph applies to any structure or other asset which falls within column 1 of the following Table ("Table 2").
(3) Sub-paragraph (1) above does not affect the question whether –
(a) any expenditure falling within column 2 of Table 2, or
(b) any expenditure on the provision of any asset of a description within any of the items in column 2 of Table 1,
is for the purposes of this Act expenditure on the provision of machinery or plant."
"This power is confined to plain cases of drafting mistakes. The courts are ever mindful that their constitutional role in this field is interpretative. They must abstain from any course which might have the appearance of judicial legislation. A statute is expressed in language approved and enacted by the legislature. So, the courts exercise considerable caution before adding or omitting or substituting words. Before interpreting a statute in this way, the court must be abundantly sure of three matters:
(1) the intended purposes of the statute or provision in question;
(2) that by inadvertence the draughtsman and Parliament failed to give effect to that purpose in the provision in question; and
(3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed.
The third of these conditions is of crucial importance. Otherwise, any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation: see per Lord Diplock in G Jones v Wrotham Park Settled Estates  AC 74,105-106."
"To apply the words literally is to defeat the obvious intention of the legislation and to produce a wholly unreasonable result. To achieve the obvious intention and produce a reasonable result we must do some violence to the words. This is not a new problem, though our standard of drafting is such that it rarely emerges. The general principle is well settled. It is only where the words are absolutely incapable of a construction which will accord with the apparent intention of the provision and will avoid a wholly unreasonable result, that the words of the enactment must prevail".
Urenco's cross-appeal, ground 2: Item 22 of List C
"An uncontentious example of the operation of Item 22 is the installation of a glasshouse within List C, Item 17. If a taxpayer lays foundations in order to receive the glasshouse, the taxpayer will have altered the land. In the absence Item 22, those groundworks could be caught by s.22(1)(b) as 'works involving the alteration of land'. The effect of Item 22 is to ensure that the expenditure on those groundworks nevertheless qualifies for allowances (so long as receiving the glasshouse is the only purpose of the groundworks)."
"Even if Urenco are right, they must still satisfy me that the structures were constructed solely for the purpose of installing plant or machinery. That is clearly not the case here. Mr Peacock submitted that each of the disputed assets was designed and constructed solely with a view to enabling the installation and safe operation of the TMF. Expenditure incurred because it is necessary to create a location for the plant and machinery to be used safely is part of the installation purpose. I do not accept that submission. They were constructed in part at least to protect operatives, the public and the environment and to provide premises which house the plant and machinery. Not for the purposes of installation."
"The FTT regarded the purposes described in the final two sentences of  [of the FTT Decision] as not being "for the purpose only of installing" plant and machinery. We consider that they were justified in doing so. Mr Peacock's proposed construction of "installing" would give an extremely wide meaning to the term, and afford little weight to the word "only". No case was put forward why a purposive construction would or should lead to such a result. We agree with the Upper Tribunal in SSE that "installation" is apt to describe a process of integrating one thing into another, and not the construction or manufacture of an asset before it is installed. We also agree that the use of the word "only" makes clear that the saving in Item 22 was intended to be a limited one."
"20. Buildings provided for testing aircraft engines run within the buildings.
21. Moveable buildings intending to be moved in the course of the qualifying activity."
"127. The OED defines "install" as "place (an apparatus, system, etc.) in position for service or use". We accept that the case law does not limit the term to simply taking a prefabricated asset and placing it in position…However, in the case law which we have reviewed, the common theme is the process which involves the integration, often with a degree of complexity, of an article or articles which have already been made into another article, structure, building or even the land itself. In none of the cases that we have been referred to has the term been held to include the creation of an item of plant in situ.
128. …It seems to us that Item 22 in List C is confined to items which need to be installed separately from the process of manufacture or construction."
Lord Justice Arnold:
Lady Justice Thirlwall: