In The Mersey Docks and Harbour Company Limited v HMRC [2024] TC09391, the First Tier Tribunal (FTT) allowed a claim for Plant and Machinery Allowances (PMAs) for expenditure incurred on the construction of a quay wall. The quay wall was a distinct asset that functioned as 'plant' and was not part of the premises in which the business is carried on.
Between 2013 and 2017, The Mersey Docks and Harbour Company Limited (Mersey Docks) developed a terminal at the Port of Liverpool which was designed to accommodate larger container vessels.
- Mersey Docks claimed Plant and Machinery Capital Allowances (PMAs) in respect of expenditure totalling £57.1 million incurred on building the quay wall.
- Following an enquiry, HMRC issued Closure notices which denied the PMA claim on the basis that:
- The quay wall expenditure was not on the provision of Plant or machinery.
- Even if the expenditure was on the provision of plant or machinery, it was excluded by s.22 CAA 2001, List B, Item 5 which precludes PMAs for expenditure on a “dock, harbour, wharf, pier, marina or jetty or any other structure in or at which vessels may be kept, or merchandise or passengers may be shipped or unshipped".
- The quay wall did not fall within any of the items of List C in s.23 CAA 2001, which provides that expenditure on certain items is unaffected by s.22 CAA 2001.
- Mersey Docks Appealed to the First Tier Tribunal (FTT).
The FTT found that:
- The quay wall was a distinct asset under the Capital Allowances Act 2001.
- The FTT followed the principles outlined in Gunfleet Sands Ltd v HMRC [2023] UKUT 260.
- While there was some physical integration between the quay wall and the Container Transition Area (CTA), they served distinct purposes.
- The quay wall's functions included enabling the berthing and mooring of vessels and supporting cranes that load and offload containers.
- The CTA provided an area where containers were stored and sorted, using cranes.
- The quay wall expenditure was incurred on the provision of plant. The quay wall was not part of the premises where the business was carried on.
- The FTT followed the principles in IRC v Barclay Curle Co Ltd [1969] 1 WLR 675 (Barclay Curle), where a complex structure, viewed as a whole, was held to function as plant in the taxpayer’s business.
- The relevant costs were split into the costs of the Ship To Shore (STS) cranes and the construction of the quay wall. HMRC accepted the PMA claim in relation to expenditure on the STS cranes. These cranes could not fulfil their purpose without the quay wall being constructed in accordance with precise specifications.
- Every part of the quay wall played a critical role in positioning large vessels for loading and unloading. The entire quay wall was plant with which the operation was performed.
- The quay wall expenditure was excluded from the scope of PMAs under s.22 CAA 2001, List B, Item 5. However, s.23 CAA 2001, List C provides that expenditure on certain items is unaffected by s.22.
- The expenditure fell within the scope of s.23 CAA 2001, List C, Item 1 Machinery (including devices for providing motive power), meaning that the quay wall qualified for PMAs.
- The 'provision of plant' extends beyond the cost of the plant itself, it can also cover expenditure on installing the plant on the basis that without installation the plant cannot be said to have been provided for the purposes of the trade.
- The quay wall expenditure was required prior to the provision of the STS cranes and was a necessary cost associated with their provision.
The FTT allowed the appeal.
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External Links
The Mersey Docks and Harbour Company Limited v HMRC [2024] TC09391