Business premises renovation allowance dispute

In its 2010-11 tax return the taxpayer claimed business premises renovation allowances (BPRA) of £12 478 201. This was the amount paid under a contract with a property developer for the conversion of a flight-training centre near London Luton Airport into a 124-room hotel.

The taxpayer said the full sum was eligible because it was negotiated at arm’s length and used for works ‘on or in connection with the conversion renovation or repair’ of a qualifying building into qualifying business premises.

HMRC disallowed £5 255 761 on the basis that the some elements did not qualify.

The First-tier Tribunal allowed the taxpayer’s appeal in part. The Upper Tribunal remade the decision allowing some of the taxpayer’s and HMRC’s grounds of appeal. Both parties appealed.

The Court of Appeal said both tribunals had given the words ‘in connection with’ in CAA 2001 s 360B(1) too broad a meaning. Instead they...