Altrad Services Limited & Anor v The Commissioners for HMRC
[2023] EWCA Civ 474
The Commissioners For HMRC v Altrad Services Limited & Anor
28 June 2024
[2024] EWCA Civ 720
Court of Appeal
Companies tried a clever tax trick to get bigger tax breaks on their equipment. They briefly sold and leased back equipment to a bank, claiming new tax breaks on the buyback. The courts said this was a tax dodge, the companies never really stopped owning the equipment, and so they didn't get the extra tax breaks. The judges said tax law shouldn't be used for tricks, only for real business reasons.
Key Facts
- •Two taxpayer companies (Altrad and Wiseman) used a marketed tax avoidance scheme to increase capital allowances for plant and machinery without incurring corresponding economic consequences.
- •The scheme involved a short-term sale and leaseback of assets to a bank, followed by reacquisition at a reduced price.
- •HMRC issued closure notices denying the additional allowances, leading to appeals through the First-tier Tribunal (FTT) and Upper Tribunal (UT).
- •The FTT dismissed the appeals, finding the scheme lacked commercial purpose and the taxpayers did not 'cease to own' the assets.
- •The UT allowed the appeals, concluding the FTT erred in its interpretation of 'cease to own' under section 61(1)(a) of the Capital Allowances Act 2001.
- •HMRC appealed to the Court of Appeal on two grounds: (1) the UT's misinterpretation of section 61(1)(a); and (2) whether the taxpayers incurred qualifying expenditure at the final stage.
Legal Principles
Ramsay principle: A purposive construction of legislation should disregard transactions with no commercial purpose solely aimed at tax avoidance.
W. T. Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300; Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46; Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16
Purposive interpretation of statutes: Legislation should be interpreted in light of its overall purpose and objective.
Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16
Capital Allowances Act 2001, sections 11 and 61: Capital allowances are linked to ownership; section 61(1)(a) defines 'cessation of ownership' as a trigger for disposal value adjustments.
Capital Allowances Act 2001
Considering the scheme as a whole: When analyzing tax avoidance schemes, the court should consider the entire series of transactions and their intended effect.
Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16
'Cease to own' in section 61(1)(a) requires a real and practical loss of ownership, not merely a temporary legal change.
Court of Appeal decision in this case
Outcomes
The Court of Appeal allowed HMRC's appeal on ground 1.
The Court found the UT misinterpreted section 61(1)(a) by focusing on a 'snapshot in time' rather than the overall scheme. The scheme's lack of commercial purpose and the temporary nature of the ownership change, designed solely for tax avoidance, meant the taxpayers did not genuinely 'cease to own' the assets.
The Court of Appeal declined to consider ground 2.
Ground 2 was unnecessary given the decision on ground 1, and it raised complex issues not previously considered by the lower tribunals. Furthermore, subsequent legislation addressed the loophole exploited by the scheme.