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Tribunal tears up Next’s tax relief claim

Press Release   •   May 28, 2014 08:00 BST

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.”

Notes to Editors

1.  The Upper Tribunal ruling in Next Distribution Ltd and Others vs HMRC is available on request from HMRC’s Press Office. The ruling will be published at   

2.  The First-tier Tribunal’s ruling from June 2012 can be read at

3.  IBA was a “writing down” allowance which wrote off the cost of constructing certain industrial buildings or structures on a straight-line basis, usually over a period of 25 years.

4.  IBA was abolished in April 2011 and no similar allowances were made after this date.

5.  Follow HMRC on Twitter @HMRCgovUK

Issued by HM Revenue & Customs Press Office

HM Revenue & Customs (HMRC) is the UK’s tax authority.

HMRC is responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support.