Commissioners for His Majesty's Revenue and Customs (Respondent) v Dolphin Drilling Ltd (Appellant)

Case summary

Case ID

UKSC/2024/0016

Parties

Appellant(s)

Dolphin Drilling Ltd

Respondent(s)

Commissioners for His Majesty's Revenue and Customs

Intervener(s)

(1) The British Rig Owners Association, (PTA Intervener)

(2) UK Chamber of Shipping (PTA Intervener)

Issue

Is a tender support vessel a “relevant asset” within the meaning of the s.356LA of the Corporation Tax Act 2010 and therefore subject to certain restrictions on tax deductions?

Facts

This case concerns a tender support vessel known as “the Borgsten” which supplied tender assisted drilling (“TAD”) services to an oil platform known as “the Dunbar”. Following receipt of the Appellant’s corporation tax return for the year ended 31 December 2014, the Respondent, HMRC, determined that the Borgsten was a “relevant asset” within the meaning of s.356LA of the Corporation Tax Act 2010 and thus it was caught by a legislative “hire cap” that restricts tax deductions in respect of payments made under a lease of an asset in the offshore oil industry. HMRC issued a closure notice on 15 January 2018 amending the return, the extra corporation tax payable being re-calculated on 15 May 2018 at £4,039,309.26. A similar closure notice was issued in relation to the year ended 31 December 2015 on 21 October 2019, the additional corporation tax in this case being £2,691,385.73. The Appellant claimed that the Borgsten is excluded from the hire cap on the basis that, in accordance with the carve-out in s.356LA, it was reasonable to suppose that the Borgsten’s use to provide accommodation for offshore workers was unlikely to be more than incidental to another use, or other uses, to which the Borgsten was likely to be put. The First-tier Tribunal allowed the Appellant’s appeal on the basis that it was reasonable to suppose that the use of the Borgsten to provide accommodation for those working on the Dunbar was unlikely to have been more than incidental to other uses of the Borgsten. The Upper Tribunal dismissed HMRC’s appeal. However, the Court of Appeal disagreed with both tribunals, holding that the use was not incidental and that the Borgsten was therefore a relevant asset subject to certain restrictions on tax deductions. The Appellant now appeals to the Supreme Court.

Date of issue

8 February 2024

Judgment appealed

Appeal

Justices

Lord Hodge

Lord Burrows

Lady Rose

Lord Richards

Lady Simler

Hearing dates

Start date

13 February 2025

End date

13 February 2025

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