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Next loses buildings allowances tribunal

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27th Jul 2012
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Next, the clothing and household furnishings retailer, has lost an appeal worth £19m to claim tax allowances for its warehouses. Nick Huber reports.

The first-tier tax tribunal dismissed an appeal by Next Distribution against HMRC’s decision to refuse its claims for Industrial Buildings Allowance (IBAs), totalling more than £19m (Next Distribution Ltd & Ors v Revenue & Customs, TC02100). 

It was accepted that the premises - Next’s centres in Doncaster which take delivery of containers of clothing, store it and then pack the clothes in special units for delivery to the Next shops and to online buyers - were “buildings or structures” and that the other criteria for claiming IBAs were met.

What was under dispute, however, was whether the warehouses were industrial buildings as defined by the Capital Allowances Act (CAA).

Next argued that goods were delivered in bulk to the building and had to be broken down before they could be sold. The breaking down of the bulk, Next argued, constituted “subjecting the goods to a process or number of processes” within section 18 of the CAA.  

HMRC argued that the requirements of section 18 were not met for four reasons, including that there was no subjection of goods to a process and that there was no storage trade.

The first-tier tribunal ruled that unpacking giant containers and repacking in smaller containers did not amount to subjecting goods to a process. And although the goods were stored in the buildings, the goods were not stored in the buildings “on their arrival in the UK from the outside”.

The goods arrived in the UK when they come into territorial waters. They were then transported more than 100 miles to the Next warehouses, the tribunal concluded.

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