The facts in the FTT decision in BlackRock Holdco 5 LLC v HMRC are complex, but the key question of whether the taxpayer had an unallowable purpose, and if so, what debits should be apportioned to that purpose, is one which is likely to be of wide application. The FTT found that, in respect of the transaction in question, the taxpayer had both a commercial purpose and a tax avoidance purpose. However, because the evidence was that the transaction would have gone ahead without the tax advantage, the debits to be attributed to the unallowable purpose were nil. The decision will probably be appealed by HMRC, and it is to be hoped that a higher court will recognise that merely obtaining an interest deduction is not, of itself, a tax advantage.
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The facts in the FTT decision in BlackRock Holdco 5 LLC v HMRC are complex, but the key question of whether the taxpayer had an unallowable purpose, and if so, what debits should be apportioned to that purpose, is one which is likely to be of wide application. The FTT found that, in respect of the transaction in question, the taxpayer had both a commercial purpose and a tax avoidance purpose. However, because the evidence was that the transaction would have gone ahead without the tax advantage, the debits to be attributed to the unallowable purpose were nil. The decision will probably be appealed by HMRC, and it is to be hoped that a higher court will recognise that merely obtaining an interest deduction is not, of itself, a tax advantage.
If you are not a subscriber, subscribe now to read this content.
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