Supreme Court holds that accommodation on support vessel was not incidental to oil drilling activities (HMRC v Dolphin Drilling Ltd)
Tax analysis: In Dolphin Drilling Ltd, the taxpayer chartered a vessel from an associated foreign company in order to provide support services to an oil driller in the North Sea. The vessel contained accommodation for the offshore oil workers. The taxpayer sought to deduct the hire costs of the vessel from its profits for corporation tax purposes, but HMRC maintained that there was a cap on deductions, pursuant to provisions in Part 8ZA of the Corporation Tax Act 2010 (CTA 2010). The issue was whether the accommodation on the vessel was incidental to other uses to which the vessel was likely to be put. The Supreme Court held that it was not as the accommodation served an independent purpose which meant that it was not incidental to, in the sense of arising out of, any other use. Written by Denis Edwards, barrister, Temple Tax Chambers.