Barclays Mercantile Business Finance Ltd v Mawson (Inspector of Taxes): ChD 22 Jul 2002

The taxpayer sought to claim for capital allowances of andpound;91 million for gas pipelines. The claimant had provided the equipment through a leasing scheme.
Held: The leases were unusual, but did not appear to be merely part of a tax avoidance scheme. However, here the company already owned and operated the pipeline, and continued to do so after the arrangement. It owed the money before, and still owed it afterwards. The issue was whether the company had incurred the expenditure in provision of the pipeline, and practitioners should be careful not to lose themselves in the technical minutiae of the documentation. This was merely financial engineering, and did not qualify: ‘If corporation tax rates changed, the head lease rent payable to BMBF would change but the sublease rent payable by BGE (UK) would remain the same. If I have understood correctly how it would work, if the head lease rent went up BGE (UK) would still pay the full amount of the sublease rent to BMBF, and the balance of the (now) increased head lease rent would be paid by BGE to BMBF; if the head lease rent went down BGE (UK) would pay part of the sublease rent to BMBF (that part being equal to the (now) reduced head lease rent) and would pay the balance of the sublease rent to BGE.’


Park J


Times 26-Aug-2002, Gazette 03-Oct-2002, [2002] EWHC Ch 1525, [2003] STC 66


Capital Allowances Act 1990 24(1)


England and Wales


CitedW T Ramsay Ltd v Inland Revenue Commissioners HL 12-Mar-1981
The taxpayers used schemes to create allowable losses, and now appealed assessment to tax. The schemes involved a series of transactions none of which were a sham, but which had the effect of cancelling each other out.
Held: If the true nature . .
CitedMcNiven (Inspector of Taxes) v Westmoreland Investments Ltd CA 26-Oct-1998
Cross loans were made between an investment company and pension schemes. The overall effect was to create payments which could be set off against Corporation Tax. They were not a pre-ordained series of transactions where the underlying loans were . .

Cited by:

Awaiting AppealBMBF (No 24) Limited v the Commissioners of Inland Revenue CA 6-Nov-2003
The taxpayer, a non-resident, operated a sale and lease back scheme of machinery to be used in its business within the UK. There had been a chain of leases.
Held: The court had first to identify the ‘relevant lease’. It was the head lease . .
Appeal fromBarclays Mercantile Business Finance Ltd v Mawson, HM Inspector of Taxes CA 13-Dec-2002
The taxpayer entered into a sale and leaseback arrangement in respect of a gas pipeline, and sought to set off the costs as a capital allowance.
Held: The company’s appeal succeeded: ‘There is nothing in the statute to suggest that ‘up-front . .
At first instanceBarclays Mercantile Business Finance Ltd v Mawson (HM Inspector of Taxes) HL 25-Nov-2004
The company had paid substantial sums out in establishing a gas pipeline, and claimed those sums against its tax as capital allowances. The transaction involved a sale and leaseback arrangement which the special commissioners had found to be a . .
Lists of cited by and citing cases may be incomplete.

Corporation Tax, Taxes Management

Updated: 12 May 2022; Ref: scu.174737