Main purpose of loan was tax mitigation

The taxpayer acquired the entire share capital of its sister company Syngenta Ltd (SL) from its parent company Syngenta Alpha BV (SABV) for consideration of shares and cash. The cash element was funded by a loan from a Dutch company.

The taxpayer treated the interest on the loan as giving rise to deductible debits for corporation tax. After an enquiry HMRC said the loan had an unallowable purpose (CTA 2009 s 442) and therefore the taxpayer was not entitled to a deduction for interest. The taxpayer claimed the main reason for entering into the loan was to obtain the funds necessary to acquire SL on the basis that it would be a good investment.

The taxpayer appealed.

The First-tier Tribunal found that the evidence showed the group implemented the arrangements to mitigate tax. The debits were not a ‘mere benefit but were the reason why...