Tribunal tears up Next’s tax relief claim
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.