New grounds permitted

Tower MCashback LLP1 and LLP2 claimed first year capital allowances in respect of software licence agreements.

HMRC refused the claim on the basis that the expenditure had been incurred with a view to granting another person the right to use the software and therefore the taxpayers were not entitled to the allowance.

The Revenue issued closure notices to the taxpayers to that effect.

The Special Commissioner allowed the taxpayers’ appeals in part.

Both parties appealed. In the High Court the judge allowed the taxpayers’ appeals. HMRC appealed.

The issues before the Court of Appeal were whether the Special Commissioner should have limited the reasons for HMRC refusing the first year allowance whether the Special Commissioner had been right to allow HMRC advance an argument as to the extent of the expenditure incurred and whether the judge had reached the correct...