Summary of recent business tax cases – Summer 2019

Tue 15 Oct 2019

This article highlights some recent business tax cases. For a further discussion of any of the issues involved, please get in touch with a member of the Mazars corporate tax or personal tax teams.

Whether construction expenditure for a ‘tails management facility for storing dangerous material concerning uranium enrichment could be plant.

This is an FTT case on capital allowances ( Urenco Chemplants Ltd).

HMRC disputed whether certain capital expenditure was plant contending that the disputed items were structures and not saved by any exception from the exclusion for structures. The FTT agreed that the Kiln facility and condenser facility structures functioned as plant and could therefore be plant, but that certain stairs access platforms associated with these facilities where not plant but part of the structure. The case also examined the distinction of whether the alteration of land was incidental to the installation of plant, making some fine distinctions to decide in HMRC’s favour.

Whether the transfer of a business including leased assets resulted in qualifying capital expenditure being incurred on capital expenditure on launch costs (pre FA 2006 introduction of CAA2001 s70A-s70YJ)

The First tier Tribunal case of Inmarsat examined whether the transfer of business assets (in return for share capital of £100m) to it in April 1999 from IMSO resulted in capital expenditure being incurred. The business assets consisted of leased satellites (at the time belonging to the lessor for capital allowance purposes, and Inmarsat incurred capital costs in procuring the launch of the satellites for which they sought to claim capital allowances. This was on the basis that the leased assets were plant or machinery transferred at market value (under what is now CAA01 s265), such that what is now CAA01 s70 permitted Inmarsat to claim for the capital launch costs. The FTT considered that the launch costs were not incurred as a requirement under the terms of the lease and was not incurred on the provision of plant or machinery (despite the terms of s265, the satellites did not belong to Inmarsat).

Entitlement to capital losses (from a payment under a guarantee of a loan) and whether trade had commenced

The FTT decision in Hunt  concerned entitlement to relief under section 253(4) TCGA 1992. HMRC accepted that the company was carrying on a business but argued that its activities did not amount to trading (a necessary condition for the relief to be given to the taxpayer).

The FTT held that the company did engage in operational activities in which it incurred a financial risk sufficiently for it to have commenced trading. Thus there was entitlement to relief under TCGA 1992 s253 (4).