02 July 2024

JTI Acquisition Co (2011) Ltd v HMRC (unallowable purpose test)

[2024] EWCA Civ 652

This is the third decision of the Court of Appeal on the unallowable purpose test this year (2024).

Joy Global Inc, which manufactures mining equipment entered into a $1billion stock purchase agreement, borrowing $500m. It then set up a ‘check the box’ company (the Appellant) to act as the acquirer and holding company of the new stock, funded by intercompany debt. The issue was whether the Appellant’s borrowing had an unallowable purpose for being party to that intercompany debt.  The Court of Appeal upheld the decision of the FTT (and UT) that it had such a purpose and that the whole of the debits claimed were unallowable.

You can read the judgment here.

Elizabeth Wilson KC acted for HMRC.  She also acted together with Ronan Magee in Kwik-Fit and other v HMRC [2024] EWCA Civ 434.