The First-tier Tribunal has handed PE and energy CFOs a usable capital-allowances judgment. In Perenco UK Limited v HMRC [2026] UKFTT 01096 (TC), released 28 July 2026, the Tribunal allowed Perenco’s appeal in full against closure notices that would have added about £39.1 million of corporation tax. HMRC had tried to strip £65.4 million of plant expenditure out of a £250.4 million first-year allowance claim on oilfield facilities bought from BP — because, days before completion, Perenco had already contracted to sell a slice of those facilities on to Premier.
HMRC’s theory was familiar: if the onward sale is already agreed, you never really acquired the plant for your own ring-fence trade; the short ownership period is a fiction; and the fixtures election that parked almost all the allowances with the seller is anti-avoidance under section 197 CAA 2001. The Tribunal disagreed on every substantive point. For CFOs running asset deals, carve-outs, pre-emption workarounds or any SPA that uses a section 198 election, the tests matter well beyond oil and gas.
What actually happened
Perenco UK Limited (PUK) carries on a UK oil and gas ring-fence trade. In May 2011 it signed the BASPA to buy BP’s roughly 67.5% interest in the Wytch Farm and Wareham onshore fields for about US$555 million, with around US$386 million allocated to plant — the Field Facilities.
Co-participant Premier pressed pre-emption rights. To stop Premier derailing completion, PUK signed the POSPA on 19 June 2011 to sell Premier about 17.2% of the Field Facilities for US$96 million. The commercial gap versus pro-rata was bridged, at Premier’s request, by a joint section 198 election fixing the sale price of the disputed facilities at US$2, so the capital allowances stayed with Perenco.
- BASPA completed 14 December 2011 — PUK became legal and equitable owner.
- POSPA completed 20 December 2011 — six days later, the disputed slice moved to Premier.
Deloitte filed a 2011 return claiming £250.4 million of first-year qualifying expenditure. On 28 July 2023 HMRC cut that to £185 million, leaving £65.4 million in dispute and increasing CT by £39,085,004.50 across 2011–2013. Carelessness penalties of about £6.8 million were raised, then withdrawn. Hearing: 12–14 May 2026 before Judge Michaela Snelders and Catherine Farquharson.
Four issues — HMRC lost all of them
1. Section 11(4): purpose and ownership are tested when you own the plant. Under section 11 CAA 2001, qualifying expenditure must be capital spend on plant wholly or partly for the qualifying activity, and the spender must own the plant as a result. HMRC wanted purpose tested at deposit or when the POSPA locked the on-sale. The Tribunal refused. Purpose is assessed when expenditure results in ownership — here, 14 December 2011. An earlier commitment to sell part does not rewrite the acquisition. Ownership was real title for six days; economic-date backdating did not erase it. PUK’s primary aim was the whole BP interest; the POSPA stopped Premier disrupting completion. Even a partial on-sale purpose still satisfies “wholly or partly”.
2. Section 45F: ring-fence FYAs still available. Ring-fence plant can attract 100% first-year allowances where the conditions are met — see HMRC CA23157, CA23100 and CA20006. HMRC said an intention to sell was a separate “use”. The Tribunal said no. Intention to sell is not a competing use while you own the asset.
3. Section 45G: short ownership does not automatically kill FYAs. Section 45G can treat expenditure as never first-year qualifying if, in the relevant period, the plant is used for a non-ring-fence purpose. Actual use for the ring-fence trade in the six-day hold, and no other use in the period, meant s.45G did not fire. Operational point: document actual use in the ownership window. A paper transfer with no operatorship trail is a different risk profile from a short hold of producing facilities.
4. Section 197 vs section 198: tax advantage ≠ main purpose. Section 198 lets parties fix fixtures consideration, subject to section 197, which rewrites disposal value to notional written-down value where obtaining a CAA tax advantage is a main purpose of a scheme or arrangement. The Tribunal accepted the POSPA and Election (not the BASPA) were a scheme and that a tax advantage could arise from the US$2 election. It still held the advantage was not a main purpose. The Election was Premier’s pricing tool — a bargaining chip, not PUK’s objective. Even if s.197 engaged, 100% FYAs drove notional WDV to nil, so the rewrite would have had no practical effect.
Practitioner walkthroughs: CW Energy, Academy of Tax Law, and Bloomberg Tax.
Why non-oil CFOs should still care
Deal sequencing is a tax fact pattern. Pre-emption side letters, stapled on-sales, warehouse SPVs and day-two hive-downs all invite the same HMRC story: you never meant to own this. Perenco says the statute looks at ownership and purpose at the right legal moment — if your papers support that moment.
Section 198 elections are not free money. They are powerful on fixtures and expressly subject to s.197. If your side drives a near-nil election purely to bank allowances the counterparty cannot use, expect a harder main-purpose fight. Record who proposed the election, why, and what commercial price problem it solved.
Main purpose is won in the data room. The judgment leans on director evidence and the negotiation trail. Assume HMRC will want board packs, pre-emption emails, election side letters, plant allocations, and proof of who could use the allowances.
The CFO controls cut
- Ownership calendar — legal completion, beneficial ownership, economic-date backdating; tax sign-off on any hold under 30 days before SPA freeze.
- Purpose memo at completion — why the whole asset set; what you will operate; which on-sale is defensive versus elective.
- Section 198 election file — who asked; numbers versus just-and-reasonable; buyer loss position; signed s.197 main-purpose note.
- Actual-use evidence in the hold window — production, operator notices, insurance, metering, JOA steps.
- Allowance quantum bridge — SPA price → plant allocation → FX → FYA/WDA → disposal value. Perenco left FX to the parties; draw the bridge yourself.
- Penalty posture — penalties were withdrawn here; still get counsel on file before filing a short-hold plus nil-election position.
- PE overlay — election inventory and seller-friendly s.198s in the 100-day plan and exit diligence.
Same fortnight, different lesson
Perenco is a substance win. It is not a free pass on procedure. The Upper Tribunal in Warner reminded taxpayers that missed SDLT claim windows are not casually repaired via overpayment relief (UKUT 284 (TCC); Claritax). Different tax, same CFO theme: evidence and timing decide quantum long after completion.
Separately, Property 118 [2026] UKFTT 1111 (TC) shows HMRC still pushing DOTAS SRNs on standardised property incorporation products — and sometimes losing on hallmark technicalities. Do not confuse a DOTAS labelling fight with a s.11 / s.197 allowances fight.
Bookmark: full judgment · s.11 · s.197 · s.198 · CA23157 · FTT Tax search.
Bottom line
Perenco is not a licence to manufacture six-day allowance parks. It rewards real ownership, real trade purpose, and a main-purpose story that matches the commercial file. HMRC put £39 million and a full anti-avoidance run on a short hold plus a US$2 election — and lost, because the acquisition was driven by the BP deal and the on-sale by pre-emption, not by tax packing.
If your pipeline has plant-heavy SPAs, fixtures elections, or completion structures where legal title and economic benefit diverge, pull the capital-allowances pack now. Check the ownership clock, purpose memo, election trail and actual-use evidence. Cheaper than arguing it after a July closure notice.
General information for finance leaders, not advice on any specific transaction. Take formal advice on live deals.