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AH Field and the loan relationships unallowable purpose test

The facts in AH Field (Holdings) Ltd v HMRC [2012] UKFTT 104 (TC) are relatively straightforward. The taxpayer company borrowed £2m from Barclays and used the funds to make a dividend payment up its corporate chain. The top holding company in the chain used the dividend received to subscribe for a zero coupon note (the Note) issued by the taxpayer which in turn used the subscription proceeds to repay the external loan. After 363 days the taxpayer entered into a new loan from Barclays allowing it to redeem the Note. This structure was repeated for a number of years. The question for the Tribunal was whether the deduction claimed for the difference between the Note issue price and the redemption proceeds was allowable.

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