JRO Griffiths – storage facility is plant for capital allowances purposes

In JRO Griffiths Ltd v HMRC [2021] UKFTT 257 (TC), the First-tier Tribunal (FTT) held that a facility used to store potatoes was plant, and that it met other conditions allowing it to qualify for capital allowances.

Background 

JRO Griffiths Ltd (JROG) is a producer of crisping potatoes, which it sells to crisp manufacturers. In order to maintain consistent supply from harvest in September until May the following year, the potatoes are stored in a controlled storage facility (the Storage Facility). 

In 2015, JROG claimed plant and machinery allowances under section 11, Capital Allowances Act 2001 (CAA), on the cost of constructing the Storage Facility. These were claimed on the basis that the Storage Facility was plant constituting a silo for temporary storage, or a cold store. 

Following an enquiry, HMRC issued closure notices under paragraph 31(1A), Schedule 18, Finance Act 1998, disallowing the claim. This was on the basis that the Storage Facility was not apparatus with which trade was carried out, it was simply premises and therefore did not qualify for the allowances.

JROG appealed the closure notices to the FTT.

FTT decision

The appeal was allowed. 

The FTT held that the Storage Facility was plant. This was on the basis that the Storage Facility was not just the location for JROG's trade, but was a central part of the business of growing and selling crisping potatoes. The potatoes had to be stored in a controlled environment in order to achieve a certain selling price. This required a specific kind of storage, which the Storage Facility provided. Accordingly, the Storage Facility was integral to the carrying out of JROG's business.

In order to be eligible for capital allowances, the Storage Facility had to meet one of the conditions referred to in List C in section 23(4), CAA. The FTT concluded that it was both a cold store (item 18 in List C) and a silo for temporary storage (item 28(a) in List C). The Storage Facility therefore qualified for the capital allowances that JROG had claimed. 

Comment

JROG relied on the main arguments relied upon by the taxpayer in Stephen May v HMRC [2018] TC6928. In that case the FTT held that a horizontal silo was plant for capital allowance purposes. Although a decision of the FTT is not binding on the FTT in a subsequent case, given that HMRC did not appeal May, it is perhaps not surprising that in the present case the FTT reached the same conclusions that it had in May. 

Although buildings are generally not items of plant, there are some specialist facilities that do function as a single entity of plant and its unfortunate that the taxpayer was, yet again, forced to take its appeal all the way to the FTT for determination.

The decision can be viewed here.