A building is in use for purposes ancillary to the purposes of a
retail shop if its use is subordinate or subservient to the
purposes of a retail shop. For example, a building used for the
provision of services to a retail shop is in use for purposes
ancillary to the purposes of a retail shop.
You should remember that a building can only be ancillary to
one purpose. This means that if a building is used for two purposes
it is not in use for purposes ancillary to either. For example, a
wholesale distribution warehouse that supplies goods to retail
shops owned by a connected person and to arms length customers is
not in use for purposes ancillary to either.
Making something is not ancillary to selling it. For example
a bakehouse that produces bread is not in use for purposes
ancillary to the shop where the bread is sold because making the
bread is not ancillary to selling it. If, however, the bakehouse is
actually part of the retail shop no IBA is due because use as a
retail shop is excluded use. A bakehouse in a separate building or
in a separate extension at the back of the shop is not part of the
shop and can qualify for IBA.
A building which is used to provide services to a retail shop
is in use for purposes ancillary to the purposes of a retail shop
and so does not qualify for IBA even if it is in the separate legal
ownership of a subsidiary or associated company or serves several
retail shops (Sarsfield v Dixons Group plc 71TC121). The Dixons
group had a subsidiary that received, stored and delivered the
goods that the group bought to sell in its retail shops. It claimed
IBA on warehouses used by the subsidiary. The IBA claim was refused
on the grounds that the warehouses were in use for purposes
ancillary to the purpose of a retail shop.
Examples of buildings that are used for purposes ancillary to
the purposes of a retail shop are:
You must remember that the exclusion refers to a retail shop and
not to a retail trade. There have to be premises that are a retail
shop or where retail trade or business (including repair work) is
carried on for the legislation excepting certain premises from IBA
to apply. For example, the premises from which a mail order
business is operated are in use for a retail trade but they are not
a retail shop because the public does not have access to them.
The running of transport not as an end in itself but entirely
for the purposes of one single business is for a purpose ancillary
to that business. This applies even when the services are provided
for an associated or connected company. For example, in Sarsfield v
Dixon's Group plc 71TC121 a company in the group received, stored
and delivered goods that other group members had purchased to sell
in their retail shops. It was not disputed that the company
providing the delivery service using its own vehicles was carrying
on a transport undertaking. However, when looked at in the context
of the group the purpose of the warehousing facility on which IBA
was claimed was to support and supply the retail shops. The use of
the warehouse was subservient and subordinate and therefore
ancillary to the purposes of the shops for it had no other use.
A dedicated warehouse such as the one in Dixon's will not
qualify even if the person running the warehouse and providing the
transport is independent from the retailer.
A general carrier who delivers goods for shops in the course
of his carrier's trade does not have a trade that is ancillary to
the purposes of a retail shop and so can qualify for IBA as a
transport undertaking.
If a warehouse is not only used to store goods for delivery
to retail shops but also for wholesale goods the mixed use of the
building will prevent it from being ancillary to the retail shops.
This follows from the Kilmarnock case where it was held that an
activity could only be ancillary to one thing. If it supports two
activities it is ancillary to neither.
