The Commissioners for HM Revenue and Customs v Lloyds TSB Equipment Leasing (NO 1) Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Newey,Judge Nowlan |
| Neutral Citation | [2013] UKUT 0368 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,14 August 2013 |
| Date | 14 August 2013 |
| Published date | 01 December 2016 |
[2013] UKUT 0368 (TCC)
Appeal number FTC/40/2012
CORPORATION TAX - Claim for capital allowances in respect of ships where the
end sub-lease was to a non-UK resident user - Time charter to that end user granted
by a UK resident company that claimed that its role (as the disponent owner under
the time charter) satisfied the terms of section 123 Capital Allowances Act 2001, and
therefore constituted a “qualifying user” so preserving the Respondent finance
leasing company’s entitlement to 25% writing-down allowances - Three issues the
subject of the appeal by HMRC, and one the subject of a cross-appeal by the
Respondent
UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Appellants
- and -
LLOYDS TSB EQUIPMENT LEASING (NO 1) LTD
Respondent
TRIBUNAL: MR JUSTICE NEWEY
JUDGE HOWARD M. NOWLAN
Sitting in public at the Rolls Building in London on 22 – 26 April 2013
David Ewart QC, Raymond Hill and Stephanie Barrett, instructed by the General
Counsel and Solicitor to HM Revenue and Customs, for the Appellants
Jonathan Peacock QC and Michael Ripley, instructed by Norton Rose LLP, for the
Respondent
2
© CROWN COPYRIGHT 2013
3
DECISION
Introduction
1. This is an appeal by HM Revenue and Customs (“HMRC”) against the 5 decision of the First-tier Tribunal (Tribunal Judges Edward Sadler and
Adrian Shipwright) in favour of the Respondent, Lloyds TSB Equipment
Leading (No 1) Ltd (“Lloyds Leasing”), on three of the four points in dispute
in this case. Lloyds Leasing also appeals, against the decision of the Tribunal
(“the FTT”) in favour of HMRC on the fourth disputed point. 10
2. The basic issue in this case is whether Lloyds Leasing was entitled to 25%
writing-down capital allowances (indeed any capital allowances) in respect of
its purchase of two ships designed to transport liquefied natural gas (“LNG”),
having regard to the fact that the ships were ultimately leased to non-UK 15 resident lessees. Notwithstanding that HMRC succeeded on one point, the
FTT’s decision (“the Decision”) meant that Lloyds Leasing sustained its full
claim for 25% writing-down allowances. The total expenditure incurred on
the two ships was £198,226,884. The largest claim for allowances was made
for Lloyds Leasing’s accounting period ended 30 September 2006, when the 20 two ships were delivered, and this is the period to which the appeal relates.
The outcome of the appeal would naturally have a bearing on claims in later
periods during which further claims would be made for writing-down
allowances as well as affecting the potential recovery of allowances given in
earlier years. 25
3. All four points in dispute revolved around the interpretation and then the
application of the provisions of section 123 of the Capital Allowances Act
2001 (“the CAA”). In other words, Lloyds Leasing’s entitlement to writing-
down allowances in this case depends on whether the role undertaken by a 30 company that we will refer to below as “K-Euro” satisfies all the
requirements of section 123, and thus precludes other sections of the CAA,
that limit allowances in respect of “overseas leasing”, from eliminating the
entitlement to allowances because the end-users of the vessels are non-UK
resident companies. In view of this, it may be of assistance if we say 35 something at this stage about the purpose of section 123 and the context in
which it appears. Once we have outlined the statutory provisions, and then
the facts, we will identify the four matters in contention.
Section 123 and its context 40
4. In terms of context, it is first important to remember that, at the time the
expenditure in question in this appeal was incurred, capital allowances could
generally be claimed by a finance lessor, as the legal owner of plant and
machinery, regardless of the fact that the finance lease would usually have 45 passed the equity and residual interest in the plant and machinery to the
lessee.
To continue reading
Request your trial