When does ownership of an asset cease?

The taxpayers entered into arrangements designed to ‘step up’ their entitlement to capital allowances on assets they already owned. Broadly the taxpayers sold the assets to a bank the bank leased them back to the taxpayers for three or four weeks and then the bank sold the assets back to the taxpayers. Under an anomaly in the legislation (later corrected by FA 2011) the taxpayers said that they did not have to bring a disposal value into account for capital allowances purposes on the initial disposal but were entitled to claim allowances on the cost of the subsequent reacquisition.

The taxpayers’ analysis of the legislation relied on them having ‘ceased to own’ the assets when they sold them to the bank. HMRC argued on Ramsay grounds that this condition had not been met. The First-tier Tribunal agreed with HMRC on the basis of its factual...