Barclays Mercantile Business Finance Ltd v Mawson (Inspector of Taxes)

This case concerned the availability of writing down allowances under the Capital Allowances Act 1990, in the context of a composite series of transactions described as having the character of finance leasing. The principal legal issue was whether the Ramsay principle applied to disregard pre-ordained steps in a composite transaction so as to prevent allowance of capital allowances. The court examined whether expenditure had been incurred "on the provision of an asset" for the purposes of ss 24(1) and 75(1) of the Capital Allowances Act 1990, and whether the commercial substance of the arranged transactions was a financing rather than a genuine sale entitling a claimant to allowances.

The judgment extract supplied does not state the court's final disposition or the detailed subsidiary findings reached on those issues.

Background and parties: The appellant was Barclays Mercantile Business Finance Ltd and the respondent was Mawson, Inspector of Taxes. The dispute concerned corporation tax treatment and entitlement to writing down allowances in relation to plant and machinery involved in a series of transactions.

Nature of the claim / relief sought: The central contention was entitlement to writing down allowances under the Capital Allowances Act 1990 (notably ss 24(1) and 75(1)) in respect of assets which, it was argued, had been provided to the taxpayer.

Issues framed by the court:

• whether the series of pre-arranged transactions ought to be treated as a single composite transaction and therefore be subject to the Ramsay principle (disregard of fictitious steps);
• whether expenditure was properly characterised as expenditure on the provision of an asset so as to qualify for writing down allowances under CAA 1990 ss 24(1) and 75(1);
• whether the transactions were, in substance, finance leasing arrangements leaving the economic benefit of ownership with a non-UK company and therefore not giving rise to qualifying capital expenditure.

Court's reasoning: The House of Lords considered the application of the Ramsay principle to composite transactions and analysed whether the commercial substance of the arrangements amounted to financing rather than genuine acquisition of plant and machinery. The court also considered statutory questions under ss 24(1) and 75(1) of the Capital Allowances Act 1990 about the characterisation of the relevant expenditure. The supplied extract does not include the court's detailed conclusions or the operative order.

Procedural history to this court: Not stated in the judgment.