Applying intangible fixed assets election to transaction

The taxpayers BI and BAH were US tax resident companies and had permanent establishments (PEs) in the UK. Both were members of a Delaware-registered partnership (BA). They paid corporation tax on the profits of the PEs under the UK/US double taxation treaty.

The companies increased their holding in a Delaware limited liability partnership (BLP) and argued that under the treaty the transaction should be regarded as an acquisition of intangible fixed assets on which the PEs should be entitled to a deduction. They made an election under FA 2002 Sch 29 that allowed a debit to be brought into account for corporation tax for the writing-down of the capitalised cost of an intangible fixed asset on a fixed rate basis. HMRC denied the relief and the taxpayers appealed.

In determining the accounting view for the purposes of FA 2002 Sch 29 the First-tier...