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ARTICLE · 30 AUGUST 2011

Capital Allowances On Software

Cliffe Dekker Hofmeyr
Cliffe Dekker Hofmeyr
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Cliffe Dekker Hofmeyr

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The United Kingdom Supreme Court's judgment in Tower MCashback LLP1 v HMRC was reported in the latest Simon's Tax Cases.

United KingdomTax
Alastair Morphet
Alastair Morphet

TAX

The United Kingdom Supreme Court's judgment in Tower MCashback LLP1 v HMRC was reported in the latest Simon's Tax Cases. The nature of the case brought the Supreme Court back to analyse its judgment as the House of Lords in Barclays Mercantile Business Finance Ltd v Mawson (Inspector of Taxes) [2005] STC 1. The case involved two LLPs, where the members were individuals with large incomes who put up only 25% of the consideration paid for acquiring the rights in software. The remaining 75% was provided by interest-free loans on non-recourse terms, made to the investor members by Special Purposes Vehicles set up for the purpose. The appellant partnerships were seeking capital allowance on the bits of MRewards technology they had purchased. As Lord Walker of Gestingthorpe put it, those familiar with the leading cases in this troublesome area of the law will not be surprised to hear that the LLPs rely strongly on the decision in Barclays Mercantile, and seek to

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