Cats North Sea Limited v The Commissioners for HMRC
Decision date: 6 June 2024
Neutral citation: [2024] UKFTT 512 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This case concerned whether Chapter 1 of Part 22 CTA 2010 applied to Amoco's hive-down of the CATS Pipeline to its wholly-owned subsidiary CNSL, and the capital allowances consequences of that hive-down and the subsequent share sale. The Tribunal held Part 22 applied, treating CNSL as successor to a notional transferred trade, but found CNSL's subsequent use of the assets for offshore ring-fence (ORF) activity triggered a disposal event under s61 CAA 2001 and a balancing charge of £169,197,035; the later share sale gave rise to no further charge. The prior PRT (CATS) Election did not alter the corporation tax/ring-fence analysis and was confined to PRT. The appeal was dismissed.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
Where Part 22 deeming provisions operate the court should focus on the trading activities actually carried on (the "notional trade"), and a transfer of part of a trade can fall within Part 22 even if the transferee carries on activities that are characterised for tax purposes as more than one trade; intra-group succession under Part 22 does not prevent the capital allowances code applying normally to changes of use by the successor, so starting to use transferred assets for non-qualifying purposes triggers a disposal event under s61 CAA 2001 with market value (capped at historic cost) brought into account.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal observed that deeming provisions must be applied purposively and not extended to produce unjust, absurd or anomalous results, and commented on allocation of qualifying expenditure to multiple pools — that the full qualifying expenditure may be treated as allocated to each pool with adjustments under the "just and reasonable" rules to avoid double relief.