Unallowable tax avoidance purpose

The taxpayer was a UK company and part of a multi-national group whose parent was in the US. It was set up to be a holding company in which it received funds including $550m in loan notes. It sought tax relief on the loan interest – about £40m..

HMRC refused the claim. It said that the taxpayer was a party to a loan relationship whose main or one of its main purposes was to secure a tax advantage by surrendering debits by way of group relief. Therefore the unallowable purpose rules applied (CTA 2009 s 441).

The First-tier and Upper Tribunals dismissed the taxpayer’s appeal.

The Court of Appeal said it was clear the taxpayer had been created with a view to securing a tax advantage. The taxpayer’s directors were aware of this and ‘went along with the scheme which to their knowledge the group had adopted for...