This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Capital Allowances Manual

IBA: Qualifying trade: Storage

A storage trade is a qualifying trade if and only if the goods or materials stored are in one of these categories:

  1. goods or materials which are to be used in the manufacture of other goods or materials;
  2. goods which are to be subjected to a process in the course of a trade;
  3. goods which have been manufactured or processed or subjected to a process but have not yet been delivered to any purchaser;
  4. goods on their arrival in the UK from a place outside the UK.


A building used for a storage trade which stores goods of any type other than the types listed above is not in use for a qualifying trade of storage.

The meaning of the phrase ‘trade which consists in the storage of goods or materials’,(rewritten as ‘a trade consisting of storing goods or materials’ in CAA01/S274), was considered in the case of Bestway (Holdings) Ltd. v Luff 70TC512.

Prior to Bestway we had not tried to define what was meant by the phrase. We had taken the view that the main test was whether the further conditions in (a) to (d) above were satisfied. The decision in Bestway suggests that this view was too wide.

The decision in Bestway clarifies the meaning of the phrase ‘trade which consists in the storage of goods or materials’. The High Court held that the determining factor indeciding whether the goods are stored is the purpose for which they are kept or held. A building is only used for storage if the purpose of keeping goods there is their storage as an end in itself. There is no such use for storage if the goods are kept there for some other purpose. Storage that is merely a necessary and transitory incident of the conduct of the business is not sufficient. In Bestway the holding of goods as trading stock in a wholesale cash and carry warehouse was held not to be storage.

The decision in C*rusabridge Investments Ltd v Casings International 54TC246 *was distinguished in Bestway. In that case, Casings held a stock of tyres that were to be sold to remoulding companies. Their customers would only take tyres in minimum batch sizes. It was therefore incumbent on the company to store tyres until such time as they had sufficient tyres of a particular type to make up a batch. The storage in that case was as an end in itself.

The main impact of the Bestway decision is likely to be on wholesale trades, particularly those supplying to customers who use the goods or materials for manufacturing or subject the goods or materials to a process. In order for the building to qualify for IBA, the storage must form a significant separate and identifiable part of the trade and be conducted as a purpose and end in itself. It must not be just a necessary and transitory incident of the conduct of the wholesale business.

An article published in TB44 in December 1999 recognised that some trades where IBA had been given in the past may not qualify under this revised interpretation. Where claims to IBA had been accepted in accordance with our previous prevailing view prior to the publication of the Tax Bulletin article we undertook not to disturb that treatment for that particular expenditure for accounting periods ending on or before 31 December 1999. This is subject to any other changes in the nature or conduct of the trade that may affect entitlement to IBA for those periods.

For expenditure incurred before the publication of the article that had not been agreed as qualifying for IBA the interpretation following the Bestway decision should be applied.

When you have determined that there is a trade of storage it is then necessary to consider the types of storage trade that qualify. The storage must be of a type listed in (a) to (d) above.

Goods in (a) are goods that are raw materials or are similar to raw materials, such as components that will be incorporated in the finished product. Machines used in the manufacturing process and consumable stores, such as new bits for drilling machines, are not in (a).

The person who stores the goods does not need to be the person who uses the goods stored in the manufacture of other goods or who subjects them to a process. For example, a warehouse used by a steel stockholder to store steel belonging to another person will qualify for IBA provided that the person who buys the steel will use it in the manufacture of goods or subject it to a process.

The goods and materials in (b) are the ones that are subjected to the process. Storage of machinery used to carry out the process is not in (b).

Goods in (c) are goods that still belong to the person who manufactured or produced them or subjected them to a process. Goods that belong to the person storing them are not in (c) because the person storing them will have purchased them and so they will have been delivered to a purchaser.

Goods are in (d) if all of the following conditions are satisfied:

  • they have been imported,
  • they are being stored for the first time since their arrival in the UK, and
  • they are still in transit - that is they have not yet arrived at their final destination in the UK.


The building in which the goods are being stored does not need to be at the place where they entered the UK but they must be in transit. Goods that are being stored at their final destination in the UK are not within (d), (Copol Clothing Ltd. v Hindmarch 57TC575). In the Copol Clothing case IBA was claimed on a warehouse where imported goods were stored. The IBA claim was refused on the grounds that when they reached the warehouse the goods were no longer in transit but had arrived at their destination. Fox LJ said that the legislation is not to be construed narrowly, and is not confined to arrival at premises in the recognised port area. However, when the goods reached the Manchester warehouse they were no longer in transit, having reached the consignee, the appellant company, which was the purchaser. He went on to say that the purpose of the legislation was to encourage the provision of storage for goods that have just arrived in the United Kingdom and before their onward transit. The storage in Manchester, however, was ‘merely the storage that any wholesaler wants for his goods’.

Quarantine kennels are not used for a storage trade that qualifies for IBA (Carr v Sayer65TC15). In Carr v Sayer IBA was claimed on quarantine kennels on the grounds that the kennels were used to store goods on their arrival in the UK. The IBA claim was refused. The kennels existed to provide the means of complying with statutory requirements for isolating animals on public health grounds, and this function did not fall within the scope of the legislation.