Tribunal confirms that AIA is not available to a mixed member partnership

Thu 25 Sep 2014

Drilling Global Consultant LLP was a limited liability partnership between an individual (JLT) and a company (TCL).  The partnership owned an aircraft.  JLT used it for business (80%) and pleasure (20%).  All profits and losses of the partnership were allocated to TCL.  The partnership incurred capital expenditure on upgrading the plane.  TCL asserted it was eligible for the annual investment allowance (AIA).  HMRC stated that there was no entitlement to the AIA.  It was accepted by both parties that the same rules applied to LLPs as do to partnerships.

The FTT observed that to be entitled to the AIA the person incurring the expenditure had to be a qualifying person.  The definition of a  “Qualifying person” in CAA 2001 s 38A (3) is quite unambiguous:

(a) an individual;

(b) a partnership of which all the members are individuals; or

(c) a company.

The taxpayer’s agent put forward various arguments all of which the FTT dismissed.  The final one was that there was no partnership between JLT and TCL as all of the profits and losses were allocated to TCL.  The FTT pointed out that the tax return for the trade in which the expenditure on plant and machinery was incurred was submitted by the LLP and that this “seems to be fatal to the appeal as TCL did not submit a tax return, did not make a claim for capital allowances and is not the appellant in these proceedings.”