Mark Shaw v The Commissioners for HMRC

For the purposes of Capital Allowances Act 2001, section 285, whether an industrial building is temporarily out of use is assessed objectively by reference to all the circumstances in the relevant chargeable period. The owner's evidenced intention to restore qualifying use is relevant. A further period of actual use is powerful evidence of temporary disuse, but is not essential.

A later change of intention, sale, destruction or other balancing event may begin permanent disuse without retrospectively changing an earlier period that was temporary. The statutory deeming provision may continue across a sale. It preserves the building's status where the successor owner genuinely and actively seeks to restore qualifying use.

Mark Shaw, as nominated member of TAL CPT Land Development Partnership LLP, appealed from the First-tier Tribunal's decision of 26 April 2019. The First-tier Tribunal had dismissed TAL's challenge to closure notices and amendments disallowing industrial building allowances.

TAL acquired buildings in an enterprise zone after their previous owner had ceased production. The buildings had been in temporary disuse for about 13 months. TAL actively marketed them for qualifying tenants, but ultimately sold them without renewed occupation after deciding to cease those efforts.

The central issue was whether the buildings remained temporarily out of use under section 285 of the Capital Allowances Act 2001, despite no subsequent actual use.

1. Appeal allowed. The First-tier Tribunal erred in treating subsequent non-use as retrospectively converting an earlier period of temporary disuse into permanent disuse.

2. Section 285 of the Capital Allowances Act 2001 is concerned with the status and use of the building, rather than creating a clean break between successive taxpayers on a sale. Nothing in the statutory scheme provides that a balancing event interrupts an existing period of temporary disuse. The deeming may therefore continue after a sale.

3. The ordinary meaning of “temporary” includes a state meant to last only for a limited time. Whether disuse is temporary must be determined objectively from all relevant circumstances in the chargeable period. The owner’s intention is relevant, but an assertion of intention is insufficient without supporting evidence, such as active marketing and the intended qualifying use.

4. Actual use before and after non-use demonstrates temporary disuse, but is not the exclusive means of proving it. A later change of circumstances may cause permanent disuse to begin without altering the character of an earlier temporary period. This construction accords with the year-by-year operation of the allowances regime and with the purpose of preserving incentives for qualifying industrial or enterprise-zone use.

5. The factual findings showed that TAL intended to restore qualifying use and actively marketed the buildings until November 2005 for some buildings and October 2006 for the remainder. The temporary disuse continued until those decisions. The Tribunal set aside the First-tier Tribunal’s decision and remade it by allowing TAL’s appeal against the closure notices.

• Upper Tribunal (Tax and Chancery Chamber): Allowed the appeal, set aside the First-tier Tribunal's decision, and remade the decision in favour of TAL.
• First-tier Tribunal: Dismissed TAL's appeal against closure notices and amendments, holding that the buildings had permanently ceased to be used as industrial buildings.