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Fidex v HMRC

In Fidex v HMRC [2014] UKUT 0454 – 13 November 2014 the UT found that a loan relationship which had straddled two accounting periods had an unallowable purpose during both periods.

Until 2002 Fidex was an orphan company associated with BNP Paribas. It bought bonds and issued its own commercial paper bearing the same characteristics as the original bonds.

In 2005 BNP Paribas implemented a tax avoidance scheme to create a tax loss in Fidex which could then be surrendered to BNP Paribas. BNP Paribas bought the shares in Fidex which issued four classes of preference shares matching the issued bonds. Fidex then switched from UK GAAP to IFRS accounting standards. As a result of the switch neither the bonds nor the preference shares appeared on Fidex’s balance sheet as the preference shares cancelled the economic qualities of the bonds. Under FA...

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