“That the Appellant had a desire to solve a maintenance problem. The access road could be repaired with patch repairs but this did not take place. The existing concrete access road was dug up and replaced with a tarmac road. The Appellant has discharged a future recurring revenue expenditure that would be required to patch/repair the road, by modification of a capital asset.”
“Of course, every repair is a replacement. You repair a roof by putting on new slates instead of old ones, which you throw away. There is no doubt about that. But the critical matter is … what is the entirety? The slate is not the entirety of the roof. You are repairing the roof by putting new slates. What is the entirety? If you replace in entirety, it is having a new one and it is not repairing an old one. I think that is very largely a question of degree, but it seems to me the Commissioners have taken the only possible view here.”
“I am of the opinion that this is a clear case of capital expenditure. I reach this conclusion taking into account the extent of the work, the permanent nature of the new barrier, the enduring advantage it confers upon preserving part of the fixed capital of the business, and the contention of the Company that it was essential to enable the trade to be carried on. It is irrelevant, in my view, in the present case to consider whether the new barrier, in point of size or effectiveness, is or is not an improvement on the old, and there is no finding upon that point. There can be cases where the work done may result in no improvement, but merely reinstatement, and yet be work involving capital expenditure on account of its size and importance.”
“The objective was not borne out of a desire to improve the distribution system or to add new or improved features. The objective was to restore the system to its original functional and reliable state. The method adopted, of inserting polyethylene piping, happened to be the most cost effective and cheapest way to achieve that goal… The nature and extent of the work carried out to the physical asset are what is determinative of the character of the work. The fact that the method chosen is the cheapest and most effective is neutral. It does not deprive expenditure of its capital character. Replacing an object may be cheaper and better than patching and minding.”
“From the plans and other documentations available it was clear that there had been a significant improvement of the premises through the repairs and alterations effected. The work had changed the character of the building as a whole. It is also clear that the Appellant Company had chosen to adapt its premises to its needs and failing compelling reasons to contrary this would be regarded as capital expenditure as an alteration.”
“It was therefore clear that there had been a scheme of alteration of the Company’s showroom and storeroom/warehouse areas and, as such, save for those items allowed by HMRC as referred to above, the expenditure was capital and therefore not an allowable deduction from profits.”
“The character and nature of the property possessed by Transco has not changed nor indeed has it been materially improved. The material used, polyethylene, is cheaper than cast iron. To adopt the words the Lord President, what was done was a mere insertion of polyethylene pipes into the old pipes, which were worn out or partially worn out, and renewing them in whole or in part along the whole network. This did not alter the character of the network.”
“In the light of the circumstances it seems to me that this was expenditure incurred by the Company with a view to enabling it to continue to earn profits from its business, not by acquiring some asset for that purpose but by putting the Company’s existing assets into a state of repair which would enable it to continue to use that asset. No doubt in the course of carrying out these works certain structural alterations were made, as one would expect with any extensive repair for a building over 400 years old, when repairs were being carried out at a time when the building techniques have completely altered. But the fact that there were alterations in the structural details of the building does not seem to me to be a good ground for proceeding upon the basis that the work produced something new. On the contrary, I think it is implicit in the Commissioners’ findings that the result of this work was not to produce something new but to repair something which had previously existed. Upon that basis it seems to me that there is no ground for regarding this expenditure as a capital expenditure. It was expenditure incurred for the purpose of enabling the Company to continue to earn profits, and was therefore in my judgment expenditure which would properly be chargeable to income.”
“It is often that, with improvements in technology, a replacement part is better than the original and would last longer or function better. That does not, of itself, change the character of the larger object or hence the appropriate description of the work.”
“The Company now has a weigh-house which is in good repair instead of a weigh-house which was in danger of becoming ruinous, but there is no suggestion that it is more convenient, more effective, or of greater capital value, than the weigh-house would have been if it was in thorough repair. I am unable to see that any new capital asset has been created.”
“A maintenance problem such as existed here may be capable of being solved in more than one way. It may be solved by work which would be regarded as a repair of the existing structure or it may be solved by scrapping all or much of the existing structure and providing a new one. In overall functional terms the result may be much the same in the two cases, but that is not by itself a reliable guide. If the latter alternative is chosen, the expenditure may well be of a capital nature.”
“It is found as a fact that the new chimney is not an appreciable improvement over the old chimney. So far as function is concerned its suitability for boiler draft is exactly the same as that of the old chimney. No additional steam – raising plants have been installed.”
“Although some old cast iron pipes have had only polyethylene pipes inserted into them, that has been done only where necessary for the purpose of repair, or precautionary repair, and has not been done to the whole network. Those considerations would point to the conclusion that expenditure is properly chargeable as revenue expenditure.”
“Many, and in fact most, repairs imply that same portion of the total fabric is renewed, the new is put in place of old. Therefore you have from time to time as things need repair to put new for old.”
“In my judgment, the test is equally artificial and remote from the facts. It may be that, for instance, a sports stadium designed and built as a single building would constitute separate “premises” and that replacement or renewal of part, more or less extensive, would be a repair of the premises as a whole, though it is not easy to see why, in such a case, a car park, baths and changing rooms forming an integral part of the structure should not be as much part of the stadium as the spectators’ seats and the ground itself.”