15 January 2025
In this episode, Elizabeth Wilson KC and Ronan Magee take a look at the “unallowable purpose rule” in the loan relationship code and, in particular, three recent Court of Appeal cases – Kwik-Fit (in which Elizabeth Wilson KC and Ronan Magee acted), BlackRock and JTI Acquisitions (in which Elizabeth Wilson KC acted).
- (2:28) outline of the unallowable purpose rule. It involves a multi-layered test.
- (4:45) a key element is what, as a matter of fact, is the group’s purpose in organising the borrowing. You decide this by looking at all the facts therefore. Discussion of this in relation to the JTI Acquisitions case, Kwik-Fit and BlackRock.
- (9:48) companies have been trying to narrow what the courts can consider when applying the test. The Court of Appeal has clearly shown this cannot be done.
- (11:52) JTI Acquisitions underlines that a company must prove its case on all the facts. It cannot be selective.
- (13:50) Do you need to be coming to the UK for other reasons, not just tax reasons, in order to benefit from the rule?
- (16:00) Syngenta: there must be proper evidence and not window dressing/assertions. What role do documents and witness evidence have in establishing facts? Importance of getting all your evidence (documentary and witness) before the tribunal.
- (22:45) Kwik-Fit: genuine commercial losses in one part of the group which they sought to set against profits in other parts of the group. The disallowed losses were, however, capped which shows the attribution rule in its safeguarding role.
- (29:01) new loan relationship code anti-avoidance provision ss445B – D.
- (30:47) some questions are not yet answered (eg attribution).
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Case citations and legislation
Cases
Kwik-Fit [2024] EWCA Civ 434
Blackrock [2024] EWCA Civ 330
JTI Acquisitions [2024] EWCA Civ 652
Fidex [2016] EWCA Civ 385
Travel Documents Service [2018] EWCA Civ 549
Syngenta [2024] UKFTT 998 (TC)
Gestmin [2013] EWHC 3560 (Comm)
Kogan v Martin [2019] EWCA Civ 1645
Euromoney [2022] UKUT 205 (TCC)
Legislation
ss441 and 442 Corporation Tax Act 2009
s1139 Corporation Tax Act 2010
ss445B – D Corporation Tax Act 2009
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