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

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 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.

But the HMRC refused Next’s claim on the grounds that unpacking bulk deliveries and repackaging them in smaller packages was beyond the scope of the allowance.

Next’s appeal against the decision was dismissed by the First-tier Tribunal. The decision has now been upheld by the Upper Tribunal.

This decision safeguards about £2.8 million of revenue.

HMRC director general of business tax Jim Harra 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.”

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