In Cape Industrial Services Ltd and another v HMRC (23 March) the FTT held that arrangements which sought to give a company capital allowances on an amount which was nearly double the expenditure which was actually incurred failed.
Under the arrangements the company (CIS) sold certain plant and machinery at market value to a banking company SGLJ. At the same time two further transactions were entered into: (i) SGLJ granted CIS a long funding finance lease of the same assets for a period of four weeks only for weekly rentals; and (ii) CIS granted SGLJ a put option to require CIS to purchase the assets on termination of the lease at their predicted market value. At the end of the term of the lease SGLJ exercised the put option and CIS purchased the assets for the option price.
CIS contended that the capital allowances consequences of the transactions were as follows. On the sale of the...
