Qualifying purpose

The taxpayer a finance leasing company claimed capital allowances in respect of its expenditure on two ships which had been built to transport natural gas from Norway to Spain and the USA.

HMRC refused the claim saying the effect of CAA 2001 s 123 was that the taxpayer was not entitled to the allowances. The First-tier Tribunal allowed the taxpayer’s appeal.

The matter moved to the Upper Tribunal where the main issue was as whether or not the taxpayer was entitled to capital allowances at 25%.

The tribunal decided the ships were used for a qualifying purpose within s 123(1) saying the qualifying test could be satisfied even “if the operating costs are not entirely met by the ship operator”.

Looking at the restriction in s 123(4) the tribunal said “all that s 123(4) requires is that a main object of a...