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07 May 2024

Kwik-Fit v HMRC [2024] EWCA Civ 434: new Court of Appeal judgment on unallowable purpose rules

The Unallowable Purpose rules in sections 441/442 Corporation Tax Act 2009 are an important part of the anti-avoidance provisions in the corporation tax code.  They disallow so much of any debits arising to a company from a loan relationship as are attributable to an ‘unallowable purpose’ (which includes a purpose of securing a ‘tax advantage’ for that company or any other person where that purpose is a ‘main’ (or important) purpose).

The Court of Appeal has now heard two cases on these provisions in the first half of 2024 and is due to hear a third later on this month.  The first, BlackRock, was handed down on 11 April.  The second, Kwik-Fit, was handed down on 3rd May 2024.  You can find a copy of the judgment here.

The Court of Appeal upheld the decision of the Upper Tribunal (which had upheld that of the First-Tier Tribunal).  Among other matters, the Court discussed the meaning of ‘tax advantage’ and what needs to be identified to find that a company has a purpose of securing a tax advantage for any other person.

Elizabeth Wilson KC leading Ronan Magee appeared for the Respondents, HMRC.

Julian Ghosh KC of One Essex Court leading Quinlan Windle and Laura Ruxandu appeared for the Appellants.

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