Queen Mary University of London v Commissioners for Her Majesty's Revenue and Customs

Facts

Queen Mary, University of London (QMC) decided in the 1990s to consolidate its cell and molecular biology work in a new facility, the Blizard Building, procured through its subsidiary Queen Mary Developments Ltd (QMD). The building required substantial specialist plant and equipment, expected to cost some £16m of a total £44m budget, much of it to be fixed to the site. As QMC had no trade, it could not itself claim capital allowances on the plant. In December 2003 it entered a financing arrangement with Lloyds Property Investment Company No.5 Ltd (LPIC), a Lloyds Bank subsidiary, under agreements executed on 3 and 10 December 2003: QMC leased the site to LPIC for 75 years, LPIC granted QMC an underlease of the same site for 75 years less 10 days, and QMD agreed to supply the plant to LPIC, which paid for it and let it to QMC as part of the site. The variable rent under the underlease was calculated by reference to the cost of the plant. LPIC and QMC opted to tax the land supplies, and HMRC treated the whole of each rental payment as standard-rated. QMC appealed to the First-tier Tribunal, contending that all or part of the supply should instead be zero-rated as a supply of qualifying medical and other equipment.