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

Holding

Capital allowances are available where the taxpayer incurs real expenditure on the acquisition of plant for use in its trade; the Ramsay approach is a tool of statutory construction, not a freestanding anti-avoidance doctrine that disregards genuine transactions.

Facts

Barclays Mercantile bought a natural gas pipeline from an Irish company, leased it back, and claimed capital allowances on the GBP 91 million cost. The cash flowed through deposits with a Barclays bank, leading the Revenue to argue the expenditure was not genuinely incurred on plant.

Reasoning

The House of Lords unanimously held that the purchase price was real expenditure on plant for use in the lessor's trade of leasing. Lords Nicholls and Hoffmann clarified that Ramsay requires the statute to be construed purposively and applied to the facts viewed realistically, but does not authorise courts to ignore genuine legal transactions just because they form part of a tax planning scheme.