Changi Airport Group (CAG) made Capital Allowances claims over three years totalling $272,575,162 on assets including the runways and taxiways but lost with the Court of Appeal determining that the assets were structures and not tools of trade.
The legislation in Singapore closely follows that of UK Capital Allowances Act 2001; the case highlights the difficulty in defining what ‘plant’ is with there being no statutory definition of plant.
The appellant was Changi Airport Group (Singapore) Pte Ltd, a Singapore-incorporated company with its principal activities being the operation of Singapore’s main airport. The asset in dispute was the ‘RTA’, which comprises two runways, various taxiways and aprons. Changi Airport Group claimed allowances for machinery or plant on the capital expenditure incurred on the RTA. However, while the Comptroller of Income Tax (the Singaporean authorities’ version of HMRC) agreed that the RTA has specifically designed features intended to facilitate safe landing, taxiing, and take-off of aircraft, they only granted ‘slower’ industrial building allowances on the basis that the RTA are not ‘plant’ but ‘structure’. Changi Airport Group disagreed with this determination and appealed the decision.
Changi Airport appealed the case on multiple grounds, arguing that the RTA played a role in their business and that the aerodrome apparatus installed on the RTA is indivisible from the RTA. They also argued that the Board erred in applying both local and foreign cases, including Schofield and Barclay Curle.
The Court accepted that the RTA facilitates the safe landing, ground movement and take-off of aircraft. However, they sided with the Comptroller in finding that these functions are performed by the aerodrome equipment, such as the airfield lighting system, instrument landing system, signs and aircraft docking guidance system, for which Capital Allowances had been granted, and that although the aerodrome equipment is not designed to work without the RTA, the RTA continues to function even in the absence of the aerodrome equipment. That the RTA is a purpose-built structure that must be durable enough for aircraft to land, traverse, and rest also does not render it ‘plant’.
In line with UK legislation, the Singapore Income Tax Act does not provide a definition of ‘machinery or plant’ as such. Instead, the Inland Revenue Authority of Singapore frequently adopts UK case law on the meaning of ‘plant’ in its technical guidance. As suggested in the Changi Airport case, these cases provide nuance and principles which may assist the court in assessing whether an asset has the qualities of ‘plant’.
Although it might not be common, capital allowances cases in the UK have a long history of adapting overseas cases in the judgments, such as Wangaratta, an Australian case about a dyehouse, and Waitaki, a New Zealand case about a cold store. It will be interesting to see if the Changi case is relied upon in any future UK case and in which direction. While whether this case has any impact by analogy in the UK courts remains to be seen, taxpayers will find it informative when making decisions on where the plant-structure divide sits for their particular situation.