Wellstead v Revenue and Customs (INCOME TAX/CORPORATION TAX : Capital allowances) [2016] UKFTT 492 (TC) (13 July 2016)

Wellstead v Revenue and Customs (INCOME TAX/CORPORATION TAX : Capital allowances) [2016] UKFTT 492 (TC) (13 July 2016)

The Tribunal held that, on a purposive construction of the relevant provisions of the Capital Allowances Act 2001, the grant of the underlease to Mr Wellstead, which effectively transferred all of HCL's rights in Unit 2 save for a nominal reversion, constituted a sale of the relevant interest for the purposes of section 296. The statutory scheme, particularly section 288(1), anticipates that in some circumstances the grant of a subordinate interest may cause the original interest to cease to be the relevant interest, and the facts here justified treating the underlease as a sale of the relevant interest. There was no policy reason to deny relief where the economic substance was the same...

Citation
[2016] UKFTT 492
Parties
Appellant: David Wellstead; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
13 July 2016
Procedural Posture
Appeal / First Tier Tribunal (tax) Decision
Outcome
Appeal allowed
Legal Topics
Income Tax, Corporation Tax, Capital Allowances, Industrial Buildings Allowances, Statutory Interpretation
Tax Law Income Tax Corporation Tax Capital Allowances Industrial Buildings Allowances Statutory Interpretation

Case Brief

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Parties

David Wellstead

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Appeal / First Tier Tribunal (tax) Decision

Legal Issues

  1. 1 Whether the grant of a long underlease by a developer to a purchaser constitutes a 'sale of the relevant interest' for the purposes of entitlement to industrial buildings allowances under ss286-296 Capital Allowances Act 2001.

Ratio Decidendi

The Tribunal held that, on a purposive construction of the relevant provisions of the Capital Allowances Act 2001, the grant of the underlease to Mr Wellstead, which effectively transferred all of HCL's rights in Unit 2 save for a nominal reversion, constituted a sale of the relevant interest for the purposes of section 296. The statutory scheme, particularly section 288(1), anticipates that in some circumstances the grant of a subordinate interest may cause the original interest to cease to be the relevant interest, and the facts here justified treating the underlease as a sale of the relevant interest. There was no policy reason to deny relief where the economic substance was the same...

Court Disposition

Appeal allowed

Orders

  • Mr Wellstead is entitled to claim industrial buildings allowances on the purchase price paid for the underlease of Unit 2.