Words and Phrases - "substantially changed"

The taxpayer, which subleased premises containing “Shells” consisting essentially of foundations, walls and roofs, installed wall and floor coverings and performed electrical, ventilation and plumbing work to make the premises suitable for use in its manufacturing and processing (“M&P”) operations. It took the position that the costs of the property added to the Shells for this work should be included in Class 29 rather than Class 13.

Among other requirements, in order to be a Class 29 property, the above property needed to qualify as a Class 8(b) property (i.e, "tangible property attached to a building and acquired solely for the purpose of (i) servicing, supporting, or providing access to or egress from, machinery or equipment [or] (ii) manufacturing or processing") and not a Class 1(q) property (a building or other structure including component parts). Although the Directorate agreed with the taxpayer that a property which otherwise was a Class 13 (leasehold) property (because at common law the improvements became part of the property of the landlord) could qualify as a Class 8 property (before then being potentially assimilated to Class 29), the Directorate went on to indicate that the above alterations to the Shells would be sufficient to deem the taxpayer’s leasehold interests to be a building or other structure, stating:

Generally, alterations to a property do not materially change the nature of the property if, after the alterations, the use and size of the property remain the same. …

Similarly, we are of the view that alterations to a property materially change its nature where the property has no particular purpose before the work is carried out but does have a particular purpose after the work is carried out.