(1) Daarasp LLP (2) Betex LLP v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Marcus Smith,Judge Guy Brannan |
| Neutral Citation | [2021] UKUT 0087 (TCC) |
| Subject Matter | 13 April 2021 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 13 April 2021 |
[2021] UKUT 0087 (TCC)
Appeal number: UT/2019/0002
Capital allowances – LLPs – expenditure of software licences – ambit of closure
notices – valuation of software licences
UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
(1) DAARASP LLP
(2) BETEX LLP
Appellants
-and-
THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND
CUSTOMS
Respondent
Sitting in public by way of remote video hearing treated as taking place at The Royal
Courts of Justice, Strand, London on 9 and 10 March 2021
Andrew Thornhill, QC and Ben Elliott instructed by Charterhouse (Accountants)
Limited for the Appellants
Aparna Nathan, QC and Harry Sheehan, instructed by the General Counsel and Solicitor
to Her Majesty’s Revenue and Customs for the Respondent
© CROWN COPYRIGHT 2021
TRIBUNAL:
THE HONOURABLE MR JUSTICE MARCUS SMITH
JUDGE GUY BRANNAN
2
DECISION
The parties
According to the Respondent in this appeal, the Commissioners for Her Majesty’s
Revenue and Customs (HMRC), the Appellants – to whom we shall refer, respectively,
as Daarasp and Betex and, collectively, as the Appellants – are LLPs formed in order
to take part in a marketed tax avoidance scheme aimed at securing capital allowances
in respect of the acquisition of information or communications technology assets (the
software licence(s)) for its members. The scheme was disclosed to HMRC under the
Disclosure of Tax Avoidance Schemes regime and given scheme reference number
46091087.
The Appellants, for their part, say that the scheme is not a tax avoidance scheme
and that it was disclosed to HMRC out of an abundance of caution.
The nature of the scheme
In very broad brush terms, the scheme involved:
(1) The establishment of an LLP (here: Daarasp or Betex), the designated
members of which were involved in setting up and implementing the
scheme. Individual scheme users would become members of the LLP and
would fund their contributions out of a mixture of personal resources
(approximately 20%) and borrowed funds (approximately 80%).
(2) The funds borrowed were, in each case, advanced by a bank (Hambros),
various branches or associate companies of which were involved in each
scheme in multiple different ways. For present purposes, the precise
transactional details of Hambros’ involvement do not matter.
(3) The LLP would use the contributed funds to acquire a computer
software licence. In each case, that acquisition was complex, but in general
terms:
(a) A licence was acquired from the software designer by an
intermediary company. In the case of the Daarasp scheme, the
software in question was equity trading computer software (the
Daarasp Software), the software designer was Parjun
Enterprises and the intermediary company was Damats. In the
case of the Betex scheme, the software in question provided on-
line gambling functions (the Betex Software), the software
designer was Ecoholdings Media Group Limited (Ecoholdings)
and the intermediary company was Piebet.
(b) In each case, there were close links between the LLP
(Daarasp or Betex, respectively) and the intermediary (Damats
or Piebet, respectively).
(c) In each case, Hambros advanced a significant sum to the LLP
for the purchase of the software. Daarasp acquired the software
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