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HMRC rejects Next's tax write-off claim

Next has had a tax allowance claim for warehouse construction rejected by HM Revenue and Customs (HMRC) for a second time.

Next Distribution, part of the Next Group, claimed Industrial Buildings Allowance (IBA) on £19m 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.

However, 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 retailer’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 £2.8m of revenue.

Jim Harra, director general of business tax at 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.”

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