UK and International Tax news
SC Refuses Appeals In Unallowable Purpose Cases
Monday 18th November 2024
The Supreme Court has recently refused permission to appeal in three cases involving the disallowance of interest paid on intra group borrowings following intra group debt reorganisations.
In Blackrock Holdco 5 LLC v HMRC [2024 EWCA Civ 330], the Court of Appeal UK held that the use of a debt-funded UK resident entity in an otherwise wholly US-based and equity funded ownership chain, compounded the related lack of any commercial rationale for LLC5, which had no control over the BGI US group, indicated that LLC5 not only had no commercial rationale but had no real commercial function. In addition, the board accepted and adopted the structure that had been devised to achieve a tax advantage.
In JTI Acquisition Company (2011) Ltd v HMRC [2024 EWCA Civ 652], the Court of Appeal held that the appellant had a main tax avoidance purpose, and was not a party to a loan relationship for a business or commercial purpose.
In Kwik Fit Group Ltd v HMRC [2024 EWCA Civ 434], the Court of Appeal held that the main purpose of increasing the interest rates on the assigned and existing loans was a tax avoidance purpose, as was the main purpose of entering into the new loans. It also considered that the expanded group relief available post reorganisation also had a tax avoidance motive.
In all three cases, permission to appeal to the Supreme Court was refused on the grounds that each appeal did not raise an arguable point of law. Given this, the Court of Appeal positions on the issues arising in each case are final.
If you would like more information on any of the above cases, please contact Keith Rushen on 0207 486 2378.
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