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Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1996] AC 454

Whether items affixed but subject to a lease and contract clause stating otherwise were fixtures

Facts

The appellant company provided equipment, such as central heating and crematoria equipment, for local authorities to use in their properties. The equipment was held under a lease by the local authority on the basis that it would be returned to the appellant at the end of the lease and that the lease could be terminated and the equipment repossessed for non-payment. The lease contained a term stating that the equipment remained the property of the appellant even if affixed to the local authorities’ land. The appeals and cross appeals in these circumstances related to whether the items were fixtures and therefore not the property of the appellant for tax purposes.

Issue

The issues on appeal related to whether the equipment leased by the local authorities remained the property of the appellant even though it was affixed to the local authorities’ land.

Held

It was held that whilst under the relevant legislation with regards to tax considerations property belonged to a person who was the absolute owner of it, at law, when the equipment was affixed to the land of the local authorities, it became a fixture and therefore part of that land. The term in the lease dealing with repossession was not sufficient to prevent this occurrence. This meant that the equipment was not the property of the appellant on the basis that it was a fixture. The lease simply granted the appellant equitable rights over the property.


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