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Business Income Manual

Capital/revenue divide: tangible assets: case law: football stadium

Brown v Burnley Football and Athletic Co Ltd [1980] 53TC357

This case concerned the demolition and replacement of a stand at the Moor Football Ground. Vinelott J made the point (at page 366) that there is no one governing factor that decides what is the entirety, but went on to make some general observations:

‘Thus decided cases are of value as illustrations of what in other contexts have been found to be within or without the boundary of what can be considered a “repair” and as reminders of the factors that have been found to assist the Court in reaching a conclusion. But no one factor can be isolated and elevated into a governing criterion. Nor can the same weight be given to any one factor equally in all contexts. However, two general observations can be made. First, in the often-cited words of Buckley L.J. in Lurcott v Wakely & Wheeler [1911] 1 KB 905, at page 924:

“Repair is restoration by renewal or replacement of subsidiary parts of a whole. Renewal, as distinguished from repair, is reconstruction of the entirety, meaning by the entirety not necessarily the whole but substantially the whole subject-matter under discussion.”

The second and related observation is that the question, “Is this a work or repair?” prompts the further question, “A repair of what?”; or, as Buckley L.J. expressed it, “What is ‘the whole subject-matter under discussion’?” … Reference to the cases cited to the Special Commissioners in which the Courts have had to consider whether given work was work of repair the cost of which fell to be allowed in computing the profits or losses of the taxpayer’s trade illustrates the paramount importance of correctly identifying the whole which is said to have been repaired.’

In their decision the Commissioners had tried to identify the ‘single profit-earning entity’. At page 370 Vinelott J stated that there was no ‘profit earning entity’ test:

‘In speaking of the chimney [in the Samuel Jones case] as “physically, commercially and functionally … part of an ‘entirety’, which is the factory”, Lord Cooper should not be taken as laying down a principle that the renewal of part of what can be seen as physically, commercially and functionally a profit-earning whole is prima facie a repair. He was concerned to emphasise that on the particular facts of that case the chimney was a necessary and integral part of a larger entity which was repaired.’

In other words, Lord Cooper’s comments do not set out a test for what is the entirety; he was simply saying that in the case of Samuel Jones, unlike in Bullcroft (see BIM35467), the chimney was part of the larger entirety, which can be seen from the description of the building in the Commissioners’ decision.

In a comment that did not form part of the reasoning for his decision, Vinelott J indicated that the treatment may be different where something was designed and built from the outset as a single unit:

‘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 a 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.’

Vinelott J made the point that in this case the property was not built as a single unit, but had grown over the years:

‘However, in the present case the premises occupied by the Club comprised a number of distinct structures. It was not designed, far less built, in accordance with a single plan. For instance, the Cricket Field stand was added in 1969.’

Vinelott J made the point that the different parts each had their own function:

‘Each separate part of the whole had its own distinct function. No part, except the football pitch itself, was necessary to the performance of the Club’s central activity of arranging professional football matches as a spectacle. The Club could have continued its activities without affording covered seats for those of its supporters prepared to pay for that amenity. It could have leased a part of its ground to another prepared to afford that or other amenities, as I believe is sometimes done by racecourse owners. In my judgment, therefore, the erection of the new Brunshaw Road stand was not a “repair” of any larger entity, whether identified as the whole premises occupied by the Club for the purposes of its business or as the field and surrounding stands and terraces alone.’