Commissioners for HMRC v Centrica Overseas Holdings Limited
[2022] EWCA Civ 1520
Centrica Overseas Holdings Ltd v Commissioners for His Majesty’s Revenue and Customs
16 July 2024
[2024] UKSC 25
Supreme Court
A company tried to deduct fees paid to advisors who helped it sell a part of its business. The court said these fees were not deductible because they were to sell a valuable asset (like selling a house), not for day-to-day business expenses (like paying the office rent).
Key Facts
- •Centrica Overseas Holdings Ltd (COHL), an investment holding company, incurred professional advisory fees (£2,529,697) related to the sale of its subsidiary, Oxxio BV.
- •COHL claimed these fees as a deduction under section 1219 of the Corporation Tax Act 2009.
- •HMRC disallowed the deduction, arguing the fees were capital expenditure, not deductible under section 1219(3)(a).
- •The dispute centered on whether the fees were revenue or capital expenditure under section 1219(3)(a) of the 2009 Act.
- •The Court of Appeal held the expenditure was capital in nature.
- •COHL appealed to the Supreme Court arguing the Court of Appeal misapplied the relevant legal test.
Legal Principles
The distinction between revenue and capital expenditure is a question of law.
Beauchamp v F W Woolworth plc [1990] 1 AC 478, 491-492
Expenditure made with a view to bringing into existence an asset or advantage for the enduring benefit of a trade is capital expenditure.
Atherton v British Insulated and Helsby Cables [1926] AC 205, 213-214
In determining capital/revenue nature, consider: (a) the nature of the payment, (b) its purpose, (c) how it was used, and (d) the means adopted to obtain it.
Strick v Regent Oil Co Ltd [1966] AC 295, 348
The objective purpose, not the taxpayer's subjective motive, determines whether expenditure is capital or revenue.
Lawson v Johnson Matthey plc [1992] 2 AC 324
Money spent to achieve the disposal of a capital asset is generally capital expenditure.
Pendleton v Mitchells & Butlers Ltd [1969] 2 All ER 928; ECC Quarries Ltd v Watkis [1977] 1 WLR 1386
"Expenses of a capital nature" in section 1219(3)(a) of the 2009 Act means the same as "items of a capital nature" in section 53(1), applying established principles.
This case
Outcomes
Appeal dismissed.
The Supreme Court held that the professional advisory fees were capital expenditure, not deductible under section 1219(3)(a) of the 2009 Act. The fees were incurred to facilitate the disposal of a capital asset (Oxxio), even though the exact nature of the disposal changed over time. The court found no error in the Court of Appeal's application of the relevant legal test and concluded the expenditure fell squarely within the capital expenditure exclusion.