15 April 2024

Hargreaves Property Holdings Ltd v HMRC

The Court of Appeal dismissed the taxpayer’s appeal against the decision of the UT.

The UT had upheld the FTT’s decision that the taxpayer company had a duty to deduct withholding tax on interest payments that it made pursuant to Income Tax Act 2007 (“ITA 2007”) s. 874 (with the exception of certain de minimis amounts).  Two grounds of appeal were brought by the taxpayer which were rejected.

The Court of Appeal considered that (i) the exception to the withholding obligation in ITA 2007 s. 933 (and more specifically the meaning of “beneficially entitled”) was not immune from the application of Ramsay. Parliament could not have intended the exception to apply to a company that was involved on an ephemeral basis, by way of steps that were entirely tax motivated, and which did not benefit in any real sense from the interest that it paid away; (ii) the interest was yearly, notwithstanding that some of the individual loans lasted less than a year, since the loans were in the nature of long-term funding. Applying a business-like assessment, the loans could not be viewed in isolation as short-term advances.

Richard Vallat KC and Calypso Blaj appeared for HMRC.

To view a copy of the decision please click here.

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