Main objects of transaction

The taxpayer a finance leasing company claimed capital allowances at 25% under CAA 2001 s 123 on the purchase of two merchant ships. HMRC refused the claim. The taxpayer appealed. The case proceeded through the First-tier Tribunal and Upper Tribunal which allowed the appeal to the Court of Appeal which found for HMRC and remitted it to the First-tier Tribunal to reconsider whether the taxpayer’s purpose was to obtain a 25% writing-down allowance.

 

The First-tier Tribunal said it was clear that the objects of the taxpayer’s transactions were commercial. However the availability of the capital allowances made the transactions more likely to proceed. The test was not whether the “primary object of the transaction … is to obtain a writing-down allowance but whether any one of a series has that object”. Realistically this was...