02 November 2021

Hargreaves Property Holdings Limited v HMRC; (FTT)

The FTT dismissed the taxpayer’s appeal against assessments to income tax on the basis that the taxpayer had a duty to deduct withholding tax pursuant to s. 874 Income Tax Act 2007 (“ITA 2007”) (with the exception of certain de minimis amounts) on certain interest payments.  It held that: (i) the underlying commercial reality was that the interest paid on the relevant loans arose in the UK (applying Ardmore CA); (ii) the interest was yearly (applying Lehman SC); (iii) the potential availability of treaty relief was irrelevant as the recipient of the payments had not made a claim for relief or received a direction to that effect; and (iv) to the extent that a (second) UK resident company paid out sums as consideration for the assignment to it of the right to receive a payment of interest, the company was not “beneficially entitled” to the income under s. 933 ITA 2007 (applying McGuckian HL).  See the full decision here.

Richard Vallat QC and Calypso Blaj appeared for HMRC; Patrick Way QC and Dilpreet Dhanoa of Field Court Tax appeared for the taxpayer.