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Mersey Docks and Harbour Company v HMRC

The Mersey Docks and Harbour Company spent over £57m constructing a quay wall at a new deep water container terminal in the Liverpool docks. Instinctively one might think that a wall forms part of the premises in which the business is carried on and therefore is ineligible for capital allowances. However the position is more nuanced than this and the company was able to demonstrate to the satisfaction of the FTT that the expenditure did qualify for capital allowances.

This is a classic capital allowance case which looks at several key tests. Was the wall a distinct asset or was it part of a larger asset? Was the expenditure on the wall incurred on plant and machinery? And, even if it was, did the statutory prohibition for expenditure on docks and harbours mean that allowances were not available?

In the end the Tribunal held that the expenditure was indeed on plant and machinery, largely because the wall played an active function in the way that the business