London Luton Hotel BPRA Property Fund LLP v The Commissioners for HMRC

London Luton Hotel BPRA Property Fund LLP v The Commissioners for HMRC

The phrase 'in connection with' in s.360B(1) Capital Allowances Act 2001 is to be construed narrowly, requiring a strong and close nexus with the physical works of conversion, renovation or repair. Expenditure that is too remote, such as amounts paid for support packages for borrowing, marketing fees, franchise payments for intellectual property, or payments to remove potential operators, does not qualify for BPRA. The LLP's claim for BPRA is limited to expenditure meeting this test, and the Residual Amount must be apportioned to exclude non-qualifying elements.

Parties
Appellant/respondent: London Luton Hotel BPRA Property Fund LLP; Respondents/appellants: The Commissioners for His Majesty’s Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
04 April 2023
Procedural Posture
Civil Appeal (tax) / Court of Appeal Judgment on Cross Appeals From Upper Tribunal (tax and Chancery Chamber)
Outcome
HMRC's appeal allowed in part; LLP's appeal dismissed.
Legal Topics
Capital Allowances, Business Premises Renovation Allowance (bpra), Tax Avoidance, Statutory Construction, Apportionment of Expenditure
Tax Law Statutory Interpretation Capital Allowances Business Premises Renovation Allowance (bpra) Tax Avoidance Statutory Construction Apportionment of Expenditure

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Parties

London Luton Hotel BPRA Property Fund LLP

Appellant/respondent

The Commissioners for His Majesty’s Revenue and Customs

Respondents/appellants

Procedural Posture

Civil Appeal (tax) / Court of Appeal Judgment on Cross Appeals From Upper Tribunal (tax and Chancery Chamber)

Legal Issues

  1. 1 Whether the LLP's expenditure qualifies for BPRA under s.360B(1) Capital Allowances Act 2001 ('on, or in connection with' conversion)
  2. 2 Proper construction of 'in connection with' in the BPRA legislation
  3. 3 Eligibility of specific categories of expenditure (Capital Account, Interest Amount, IFA/Promoter fees, Franchise costs, Residual Amount) for BPRA

Ratio Decidendi

The phrase 'in connection with' in s.360B(1) Capital Allowances Act 2001 is to be construed narrowly, requiring a strong and close nexus with the physical works of conversion, renovation or repair. Expenditure that is too remote, such as amounts paid for support packages for borrowing, marketing fees, franchise payments for intellectual property, or payments to remove potential operators, does not qualify for BPRA. The LLP's claim for BPRA is limited to expenditure meeting this test, and the Residual Amount must be apportioned to exclude non-qualifying elements.

Court Disposition

HMRC's appeal allowed in part; LLP's appeal dismissed.

Orders

  • HMRC's appeal on Issues 2(a) (Capital Amount), 2(c) (IFA/Promoter fees), 2(d) (Franchise costs), and 2(e) (Residual Amount) is allowed.
  • LLP's appeal on Issues 1 (entitlement to BPRA on all expenditure) and 2(b) (Interest Amount) is dismissed.