Purpose-based rules: have we hit BlackRock-bottom?

The Upper Tribunal in HMRC v BlackRock Holdco 5 LLC allowed HMRC’s appeal holding that the First-tier Tribunal was wrong to interpose certain terms (covenants) in loans when conducting its analysis of the counter-factual transaction as between the taxpayer (LLC5) and an unconnected third-party. It has held that the FTT was wrong to attribute all of the loan debits arising to LLC5’s commercial main purpose and should instead have arrived at the opposite conclusion. The UT’s decision raises a number of fundamental questions. The essence of the problem in this case and other cases such as JTI Acquisition is that main unallowable purposes are being attributed to taxpayers entering into ordinary commercial transactions merely by dint of the fact that they (or companies within their group) are aware of the availability of a particular relief. The legislation is focused at targeting a specific form of...