Tribunal tears up Next’s tax relief claim
28 May 2014 03:01 PM
A multi-million pound
tax allowance claim made by one of the UK’s largest clothing retailers
has been rejected for the second time by a tax
tribunal.
Next Distribution Limited, part
of the Next Group Plc, claimed Industrial Buildings Allowance (IBA) on
£19 million it spent on constructing two buildings used for warehousing
and other activities.
Under the now-defunct IBA,
businesses could write off some of their construction costs if the sites being
built were used to subject goods to a process or to store goods on their
arrival in the UK.
HM Revenue and Customs (HMRC)
refused Next’s claim for the allowance on the grounds that unpacking bulk
deliveries and repackaging them in smaller packages was beyond the scope of the
allowance. The company’s appeal against the decision was dismissed by
a First-tier
Tribunal and that decision has now been upheld by the Upper Tribunal.
This decision safeguards about £2.8 million of revenue.
Jim Harra, Director General,
Business Tax, HMRC, said:
HMRC’s decision to reject
Next’s claim for this tax relief has now been backed by two
tribunals.
This case shows that, when any
business – large or small – tries to claim capital allowances
beyond their intended scope, HMRC will challenge it, including
through the courts if necessary.