Main object

The taxpayer was a finance leasing company that claimed capital allowances at the rate of 25% in respect of the purchase of two merchant ships.

HMRC refused the claim saying the effect of CAA 2001 s 123 was that the business was not entitled to the allowances.

The First-tier Tribunal (FTT) allowed the taxpayer’s appeal – and the Upper Tribunal confirmed the decision holding that the only requirement of s 123(4) was that the taxpayer’s main object of a relevant transaction was to obtain a writing-down allowance other than an allowance such as s 109 (writing-down allowance at 10%).

The Court of Appeal said the taxpayer was entitled in principle to the 25% writing-down allowances in respect of purchase costs of the ships which were used for a qualifying purpose within s 123(1).

The question raised by s 123(4) was whether “the main object or one...