Consortium relief allowed

Bupa Finance acquired a large shareholding in CX Reinsurance from Tawa in March 2006. The share purchase agreement required Bupa Finance to pay Tawa an earn-out consideration equal to any distribution made by CX.

Bupa Insurance a subsidiary of Bupa Finance later claimed consortium relief under TA 1988 s 402(3) and s 406(2) in respect of trading losses incurred by CX.

HMRC rejected the claim saying Bupa Finance’s contractual obligation to pay an earn-out consideration to Tawa affected the former’s beneficial entitlement to distributions made by CX.

The taxpayer appealed. The issue was whether Bupa was beneficially entitled to the distributions for consortium relief purposes (TA 1988 s 403C).

The Upper Tribunal concluded that Bupa’s contract with Tawa did not deprive it of beneficial entitlement to any distribution (actual or notional) made by CX. Section 403C restricted consortium relief only where the rights in s...