19 July 2022

HMRC -v- BlackRock Holdco 5 LLC; (UT)

In HMRC v BlackRock Holdco 5 LLC [2022] UKUT 199 (TCC), the Upper Tribunal allowed HMRC’s appeal against the decision of the FTT [2020] UKFTT 443 (TC). The appeal concerned the structure used by the BlackRock group of companies to acquire the North American investment management business of Barclays Global Investors from Barclays Bank plc in December 2009. As part of that structure, BlackRock Holdco 5, LLC, issued $4 billion worth of loan notes (“the loans”) to its parent, BlackRock Holdco 4, LLC. HMRC had disallowed the non-trading loan relationship debits in respect of the interest and other expenses payable on the loans.

The Upper Tribunal reversed the FTT’s conclusion in relation to the application of the transfer pricing legislation, holding that the loans would not have been made between independent enterprises acting at arm’s length. It upheld the FTT’s conclusion that there had been both an unallowable tax advantage main purpose within the meaning of section 442 Corporation Tax Act 2009 and a commercial main purpose in entering into the loans. However, it reversed the FTT’s conclusion that the debits ought to be apportioned under section 441 CTA 2009 to the commercial purpose and held that they should be apportioned to the tax purpose so that they were disallowed.

The decision is of interest as it is one of the few UK cases to consider the application of the transfer pricing legislation. It is also the first UT decision to consider how the just and reasonable apportionment under section 441 CTA 2009 ought to be carried out when there are two main purposes to making a loan.

David Ewart QC and Sadiya Choudhury acted for HMRC.

To view the decision, please click here.