Published: Fri, 12 Oct 2018
Melluish v BMI (No. 3)  AC 454
REVENUE LAW – CAPITAL ALLOWANCES – LEASEHOLDS – FIXTURES
BMI acquired and then hired out plant and machinery, such as central heating equipment and crematoria equipment, to local authorities. In each case a master lease was executed which specified the equipment to be leased and provided that the lessee would return the equipment at the expiry of the lease and that in the event of non-payment the lease could be terminated and the equipment repossessed. The leases also provided that the equipment remained the property of the lessor even if affixed to other property during the term of the lease. BMI claimed writing down allowances for the plant and machinery which was challenged by the Revenue, on the basis that the equipment had become affixed to the local authority premises and had thus passed into local authority ownership.
From a property law perspective the pertinent issue for the House of Lords to resolve was whether, in the circumstances of the case, the items in question could properly be described as fixtures and, if so, whether the provision in the lease nevertheless precluded those items from passing into the ownership of the local authorities. If ownership had passed then BMI would not be able to claim the writing down allowance.
The House of Lords, in allowing the appeal, found that, on a true construction of s.44, property belonged to a person if he was the absolute owner of it. When property was affixed to the local authorities' premises the equipment had, under general law, become part of the land and was therefore owned by the local authorities; the agreement was not enough to avoid that consequence.
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