The Upper Tribunal has held that the defeased leasing rules in the Tonnage Tax Regime denied capital allowances for expenditure incurred on the acquisition of five ships. The taxpayers leased the ships to a bank subsidiary, which in turn sub-leased them to companies within the Tonnage Tax Regime.
The Tribunal confirmed that the effect of those arrangements was to remove the greater part of the relevant non-compliance risk, so that the allowances were denied by paragraph 90 of Schedule 22. In particular, it upheld the First-tier Tribunal’s approach to identifying the provision made by the lease and its methodology for measuring the reduction in non-compliance risk.
Ben Elliott appeared for HMRC with Ed Hellier.
You can read the judgment here.
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