Treaty exemption was not the main purpose

BLM was incorporated and tax resident in Ireland. It was a European fund investment corporate vehicle for a US asset manager. It acquired the debt claim of LBIE part of the Lehman Brothers global group that went into administration in 2008.

The principal of the debt had already been paid but the acquisition of the claim gave BLM the right to receive interest which had accrued on the claim. A dispute arose as to whether BLM was entitled under the UK-Ireland double tax treaty to recover withholding tax deducted from that interest.

HMRC refused the claim on the basis that the treaty precluded such recovery when a main purpose of assigning the debt claim was to take advantage of the treaty – treaty shopping.

It was clear from...