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Tarnished contract
Key points
- From their inception in FA 1980 enterprise zone allowances (EZAs) presented the potential to claim enhanced capital allowances offering 100% relief for qualifying expenditure.
- Two LLPs were formed (Cobalt Data Centre 2 and Cobalt Data Centre 3) and promoted to investors wishing to mitigate income tax.
- HMRC denied the claims for EZAs on the basis the data centres were not constructed under the contract because it had been varied too much.
- Enhanced allowances continue to be offered despite the risk that they might become the focus for exploitation or avoidance.
- HMRC seems to be defeating more avoidance schemes in the higher courts.
The recent decision of the Court of Appeal in Cobalt Data Centre 2 LLP and Cobalt Data Centre 3 LLP v CRC perhaps does not make for the most engaging read for most tax advisers. However it did provide an interesting conclusion on contracts related...
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