London Luton Hotel BPRA Property Fund LLP v The Commissioners for HM Revenue and Customs [2021] UKUT 0147 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Michael Green,Judge Thomas Scott |
| Neutral Citation | [2021] UKUT 0147 (TCC) |
| Subject Matter | 17 June 2021 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 21 June 2021 |
[2021] UKUT 0147 (TCC)
Appeal numbers: UT/2019/0079
UT/2019/0087
CAPITAL ALLOWANCES – payment of development sum by LLP in
relation to conversion of flight training centre into functioning hotel –
eligibility of payment for Business Premises Renovation Allowances –
whether particular amounts paid qualified for BPRA
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
LONDON LUTON HOTEL BPRA PROPERTY FUND LLP
Appellant/Respondent
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents/Appellants
TRIBUNAL:
MR JUSTICE MICHAEL GREEN
JUDGE THOMAS SCOTT
Sitting in public by way of video hearing treated as taking place in London from
18 to 26 November 2020
Malcolm Gammie QC and Jonathan Bremner QC, instructed by DWF Law
LLP, for London Luton Hotel BPRA Property Fund LLP
Jonathan Davey QC, John Brinsmead-Stockham, Sam Chandler and Nicholas
Macklam, instructed by the General Counsel and Solicitor to HM Revenue and
Customs, for HMRC
© CROWN COPYRIGHT 2021
DECISION
1. This is our decision on the appeals by London Luton Hotel BPRA Property
Fund LLP (the “LLP”) and HMRC against the decision of the First-tier Tribunal
(the “FTT”) reported at [2019] UKFTT 212 TC (the “Decision”).
Background
2. In its tax return for the year ended 5 April 2011 the LLP claimed £12,478,201 of
business premises renovation allowances (“BPRA”), a form of capital allowances.
3. That expenditure had been incurred by the LLP under an agreement entered into
between the LLP and OVL (Bankfield) LLP
1
(“OVL” or the “Developer”) which
provided for the conversion of a former flight training centre near London Luton
Airport into a Ramada Encore hotel.
4. HMRC opened an enquiry into the tax return and issued a closure notice
2
on 5
February 2016 which reduced the BPRA claim. HMRC subsequently revised the
amount so disallowed, with the result that £5,255,761 of the claim was disallowed
and a claim for BPRA of £7,222,439 was allowed.
5. The basis of the disallowance by HMRC was that the following items of
expenditure, discussed in detail below, were not qualifying expenditure under the
BPRA legislation:
(1)The Interest Amount.
(2)The Capital Amount.
(3)IFA (Independent Financial Adviser) fees.
(4)Promoter fees.
(5)Legal fees.
(6)Franchise costs.
(7)Fixtures, Fittings and Equipment.
(8)Part of the Residual amount.
6. The LLP appealed against the closure notice. The LLP’s primary case was that
the entirety of the sum paid to OVL qualified for BPRA, and it was not appropriate
to enquire into the constituent elements of OVL’s expenditure. The LLP further
argued that, if the FTT did not accept that case, the constituent elements disallowed
by HMRC were all eligible for BPRA.
1
OVL later changed its nam e to Cannock Projects LLP, and is referred to by the FTT in the
Decision variously as OVL and Cannock.
2
Under s28B Taxes Management Act 1970.
3
7. The FTT rejected the LLP’s primary case.
8. In relation to the eligibility for BPRA of the constituent elements of expenditure
disallowed by HMRC, the FTT allowed the LLP’s appeal in part. Its conclusions
were as follows:
(1)The Interest Amount qualified.
(2)The Capital Amount did not qualify.
(3)The IFA Fees qualified.
(4)The Promoter Fees qualified.
(5)“Most of” the Legal Fees did not qualify, but some did, with the specific
amounts left to be agreed by the parties.
(6)As regards the Franchise Costs, part (the “Sanguine Payment”) did not
qualify, and part (the “Ramada Payment”) did.
(7)The Fixtures, Fittings and Equipment qualified.
(8)The Residual amount must be apportioned between qualifying and non-
qualifying amounts, with the precise apportionment being left to the parties
to calculate.
9. With the permission of the FTT, the parties appeal most of the grounds on
which each of them failed before the FTT.
10. The LLP appeals against the FTT’s decision on its primary case, and also
against the FTT’s decisions that: the Capital Amount; “most of” the Legal Fees;
the Sanguine Payment and the non-qualifying element of the Residual amount did
not qualify for BPRA.
11. HMRC appeal against the FTT’s decisions that: the Interest Amount; the IFA
Fees; the Promoter Fees; the qualifying portion of the Legal Fees and the Fixtures,
Fittings and Equipment (as regards certain items only) did qualify for BPRA.
12. The hearing before us took place remotely over a two-week period. The
Tribunal is grateful to all Counsel for their assistance and patience in ensuring that
the hearing dealt with the considerable volume of documentation and issues
efficiently and within the allotted time.
Summary of the key facts and documents
13. We deal below in detail with the contractual provisions relevant to the issues in
this appeal, but the following is a summary of the key facts and documentation.
14. As will be seen below, the BPRA legislation provides 100% capital allowances
for capital expenditure incurred on or in connection with specified activities which
bring certain business premises in designated areas called Enterprise Areas back
into productive use. In 2009, the Developer identified a building known as Blush
House (the “Property”) near London Luton Airport as having the potential to be
To continue reading
Request your trial