Satellite launch costs ineligible for capital allowances

The taxpayer was the successor to the International Maritime Satellite Organisation (IMSO). Six satellites had been paid for by lessors and leased to IMSO which launched them. The lessors claimed capital allowances on the capital expenditure incurred in the acquisition of the satellites but not on the expenditure incurred by IMSO on their launch.

IMSO later transferred its business to the taxpayer and the lease agreements relating to the satellites were novated so that from the time of the transfer the satellites were leased to the taxpayer which became responsible for the rental payments.

The taxpayer claimed capital allowances on part of the open market value of the satellites at the date of the business transfer. This was on the basis that CAA 1990 s 61(4) (now CAA 2001 s 70) deemed the satellites to have belonged to IMSO before the transfer. So when Inmarsat succeeded to...