In a recent capital allowances case, The Mersey Docks and Harbour Company Limited secured a significant legal victory against HMRC at a First Tier Tribunal concerning capital allowances for the construction of a quay wall at the Port of Liverpool.
The case ([2024] UKFTT 001163 (TC)), centred on whether the £57.13m expenditure, incurred in the appellants 31 March 2015 to 31 March 2018 accounting periods, on the construction of a quay wall at the container terminal, qualified for plant and machinery allowances (PMAs) under the CAA 2001.
HMRC contended that the expenditure incurred would not be treated as expenditure on the provision of plant or machinery and therefore tax relief would be denied.
The tribunal had to address three tests to reach its decision:
- Identification of a distinct asset
- Did it function as plant or machinery
- Could the expenditure fall into any exclusions in s23
- Identification of a distinct asset
- Did it function as plant or machinery
- Could the expenditure fall into any exclusions in s23
After appeal, it was found that the STS cranes, a key part of The Mersey Docks and Harbour Company Limited’s trade, could not function without the quay wall. With all three tests being met, the quay wall was held to be a distinct item in which expenditure had been incurred on the provision of plant or machinery as defined in CAA 2001 s23, List C Item 1.
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