Claim for enterprise zone allowances

The taxpayers were limited liability partnerships (LLPs) that acquired an assignment of rights under a construction contract relating to work to be undertaken at the Cobalt Business Park situated within an enterprise zone. Two data centres were built but efforts to find a tenant were unsuccessful. The LLPs claimed enterprise zone allowances (EZAs) on the expenditure incurred on the rights.

HMRC refused the claim. The taxpayers’ appeal to the First-tier Tribunal was dismissed so they appealed to the Upper Tribunal.

The first issue was whether the taxpayers had made the payments under the contract for the purpose of CAA 2001 s 298. HMRC said substantial changes made to the contract had amounted to its rescission. The tribunal disagreed saying the contract had been amended and therefore the expenditure had been incurred under it.

Further the contract contained enforceable obligations ‘from the moment it was executed’. It was entered into...