Dolphin Drilling: the meaning of ‘incidental’ and determining intention from contracts

The recent Upper Tribunal decision in HMRC v Dolphin Drilling Ltd considered whether a tender support vessel providing tender assisted drilling services in the North Sea is a ‘relevant asset’ for the purposes of determining whether certain deductions are available under the oil contractor activities rules. The exemption at CTA 2010 356LA(3) states that an asset is not a ‘relevant asset’ if it is reasonable to suppose that its use to provide accommodation for offshore workers is unlikely to be more than incidental to other uses to which the asset is likely to be put. The UT dismissed HMRC’s appeal and explored the potentially wider application of the word ‘incidental’ and the primacy of contract documents over oral evidence where it is not the contract itself that is being challenged.