Maco Door and Window Hardware (UK) Ltd v Revenue and Customs

For section 18(2) of the Capital Allowances Act 1990, “a part of a trade” bears its ordinary meaning. A commercially distinct activity may be such a part even though it is ancillary to the wider business and could not itself be described as a separate trade. The activity need not be storage as an end in itself, an essential part, or a significant, separate and identifiable part-trade. Whether storage forms part of the trade is primarily a matter for the fact-finding tribunal. An appellate court should not interfere where the tribunal applied the ordinary statutory language and reached a conclusion open on the facts.

Maco imported and sold window and door hardware. It claimed capital allowances for a warehouse in which goods were held before delivery to customers. The claim relied on section 18(1)(f)(i) and section 18(2) of the Capital Allowances Act 1990.

The Special Commissioner allowed the claim, finding that storage was a distinct part of Maco’s trade. Patten J reversed that decision, holding that the storage activity supported Maco’s wholesale business but was not itself a trading or commercial activity. The central issue before the Court of Appeal was the meaning of “a part of a trade” in section 18(2).

By a majority, Carnwath LJ and Hallett LJ allowed the appeal and restored the Special Commissioner’s decision. Lawrence Collins LJ dissented and would have dismissed the appeal.

1. Section 18(2) of the Capital Allowances Act 1990 should be read according to the ordinary meaning of “a part of a trade”. The legislation did not justify additional requirements that the activity be storage as an end in itself, an essential part of the business, a significant, separate and identifiable part-trade, or an activity in the nature of a trade.
2. The reasoning in Saxone Lilley & Skinner (Holdings) Ltd v IRC (1967) 44 TC 122 supported treating dealings with different categories of goods as separate parts of a trade. Kilmarnock Equitable Cooperative Society Ltd v IRC (1966) 42 TC 675 likewise showed that a distinct commercial activity could qualify even though it formed only a small part of a wider business.
3. The Special Commissioner was entitled to distinguish Bestway (Holdings) Ltd v Luff (1998) 70 TC 512. In that case the goods were held for immediate sale; here the storage had a distinct commercial role because of the supply and delivery arrangements. The Commissioner’s factual conclusion was open to him and disclosed no error of law. The appeal was therefore allowed and the decision below set aside.
4. Lawrence Collins LJ considered that section 18(2) applied only where the relevant part of a composite trade itself satisfied a condition in section 18(1). On that construction, section 18(2) could not enlarge the categories in section 18(1), and Maco’s incidental storage did not qualify.

1. Court of Appeal (Civil Division) — Appeal allowed by majority. Patten J’s decision was set aside and the Special Commissioner’s decision restored.
2. Chancery Division — Patten J reversed the Special Commissioner and rejected the capital allowances claim.
3. Special Commissioner — The claim was allowed on the basis that storage was a distinct part of Maco’s trade.