HMRC have won a hearing at the Court of Appeal (CoA) in relation to the submission of a new ground at appeal relating to a capital allowance scheme. Two taxpaying companies had entered into arrangements to acquire assets, then dispose of them and re-acquire under long funding finance leases that terminated within weeks and to then re-acquire them. The effect hoped for by the taxpaying companies was that they could step up the value of capital allowances while continually using the same singular assets.
The Upper Tribunal found for the two taxpaying companies but noted in its judgement that if it had been argued differently, they might have found for HMRC.
HMRC appealed to the CoA but the taxpayers held that it would be prejudicial to them to raise new a new ground at appeal. The CoA has found that while the ground raised by HMRC is a new ground it will not be prejudicial to the taxpayers as the CoA will make assumption about purpose of the transactions in the taxpayers’ favour.
The case will now go forward to a full substantive hearing where the CoA will decide whether the tax avoidance scheme is effective. It is clear that the scheme enables double, triple, quadruple, endless capital allowance claims on a singular asset and the CoA have now allowed grounds to hear arguments on the arrangement in full. It seems strange that this outcome of multiple claims on singular assets would have been Parliament’s intention when enacting the varying parts of the Capital Allowances legislation.
The decision can be found at: Altrad Services Limited & Anor v The Commissioners for HMRC – Find case law (nationalarchives.gov.uk)
Determining what expenditure qualifies for capital allowances can be tricky as the above case highlights. We are very experienced with this subject matter and can help you plan expenditure to take advantage of these very generous tax deductions. Please do contact us if you would like assistance.
Please contact us if you have been asked to participate in a tax avoidance scheme where capital allowances are expected to be claimed more than once. Many of these schemes have been shown to be ineffective.
