The Upper Tribunal (UT) decision in HMRC v GCH Corporation Ltd and others [2026] UKUT 219 (TCC) contains insights in relation to procedural grounds and permissions for appeal, and the difference between a ‘trade’ and a ‘business’ and why those are not the same thing, which is of wider interest than just partnership tax law. But this comment focuses on another aspect: the Ramsay principle.
We have become used to HMRC getting their own way in the courts recently, from causing chaos in the world of renewables by denying tax relief for surveys (Orsted West of Duddon Sands (UK) Ltd and others v HMRC [2026] UKSC 12) to sending the professional services industry into a tizzy by redefining aspects of the salaried members rules (HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18). Amidst this background, the UT decision in GCH Corporation Ltd came as something of a surprise.
The actual background facts are pretty hardcore: contribute assets (loan note proceeds of a share sale, with embedded deferred gains) into a new limited liability partnership (LLP) that’s carried out a little bit of prior investment business, leave the consideration outstanding, pop the LLP into members’ voluntary liquidation, realise the asset. Vanish the gain accrued prior to contribution as if by magic, because TCGA 1992 s 59A stops a tax event going in, and the liquidation turns off s 59A coming out. That was the idea, anyway. HMRC, as one might imagine, issued discovery assessments for capital gains tax on some of the taxpayers (three family trusts in this case). The crux of HMRC’s argument was that s 59A could not apply, because (in their eyes) the LLP was not carrying on a business with a view to profit. And they wheeled out WT Ramsay Ltd v IRC [1981] STC 174 to use as an anti-avoidance panacea to help prove their case.
You might well expect (as I did) that you’d be about to read of a slaughter in which the courts – the First-tier Tribunal (FTT) and then the UT – would gently roll over, and dutifully agree with HMRC that they could indeed use the Ramsay principle of legislative interpretation to conclude that Parliament could not possibly have intended the treatment by s 59A(1) to apply to a LLP whose primary function (arguably) was to pocket loan notes to engineer a cunning tax avoidance scheme and not to fund any ‘real’ trading or business.
But no.
Neither the FTT nor the UT (amid the appeal and cross-appeal) reached that conclusion. In a throwback to the days when legislation did what it said on the tin and if HMRC didn’t like it they could jolly well change the law (since 30 October 2024 such arrangements would be difficult given s 59AA), the FTT applied the Ramsay principle and found for the taxpayer. They asked what a purposive construction of s 59A should be and whether it was intended to apply to the transactions viewed realistically, and concluded that if the simple test in s 59A (LLP + trade or business + view to profit = transparent) was satisfied as regards the LLP’s activities as a whole, then that was that. Section 59A wasn’t an anti-avoidance measure, and HMRC couldn’t use Ramsay to make it one or insert a purpose test where none existed; whatever the purpose of the business carried on, one was being carried on (there was activity, however intermittent) and it had a view to profit (it made some). HMRC tried again at the UT and were (very gently) slapped down.
Now, before we get too excited, this is only a UT decision. I would be surprised if HMRC don’t have another go and try to get the Court of Appeal on board. We’ve seen this before with Altrad Services Ltd (formerly Cape Industrial Services Ltd) v HMRC [2024] EWCA Civ 720 where the Court of Appeal (re)applied the Ramsay principle to overturn the UT decision in a capital allowances tax scheme. But while we can, let’s bask in the afterglow of the courts applying the law, before they find reasons to agree with HMRC.
The Upper Tribunal (UT) decision in HMRC v GCH Corporation Ltd and others [2026] UKUT 219 (TCC) contains insights in relation to procedural grounds and permissions for appeal, and the difference between a ‘trade’ and a ‘business’ and why those are not the same thing, which is of wider interest than just partnership tax law. But this comment focuses on another aspect: the Ramsay principle.
We have become used to HMRC getting their own way in the courts recently, from causing chaos in the world of renewables by denying tax relief for surveys (Orsted West of Duddon Sands (UK) Ltd and others v HMRC [2026] UKSC 12) to sending the professional services industry into a tizzy by redefining aspects of the salaried members rules (HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18). Amidst this background, the UT decision in GCH Corporation Ltd came as something of a surprise.
The actual background facts are pretty hardcore: contribute assets (loan note proceeds of a share sale, with embedded deferred gains) into a new limited liability partnership (LLP) that’s carried out a little bit of prior investment business, leave the consideration outstanding, pop the LLP into members’ voluntary liquidation, realise the asset. Vanish the gain accrued prior to contribution as if by magic, because TCGA 1992 s 59A stops a tax event going in, and the liquidation turns off s 59A coming out. That was the idea, anyway. HMRC, as one might imagine, issued discovery assessments for capital gains tax on some of the taxpayers (three family trusts in this case). The crux of HMRC’s argument was that s 59A could not apply, because (in their eyes) the LLP was not carrying on a business with a view to profit. And they wheeled out WT Ramsay Ltd v IRC [1981] STC 174 to use as an anti-avoidance panacea to help prove their case.
You might well expect (as I did) that you’d be about to read of a slaughter in which the courts – the First-tier Tribunal (FTT) and then the UT – would gently roll over, and dutifully agree with HMRC that they could indeed use the Ramsay principle of legislative interpretation to conclude that Parliament could not possibly have intended the treatment by s 59A(1) to apply to a LLP whose primary function (arguably) was to pocket loan notes to engineer a cunning tax avoidance scheme and not to fund any ‘real’ trading or business.
But no.
Neither the FTT nor the UT (amid the appeal and cross-appeal) reached that conclusion. In a throwback to the days when legislation did what it said on the tin and if HMRC didn’t like it they could jolly well change the law (since 30 October 2024 such arrangements would be difficult given s 59AA), the FTT applied the Ramsay principle and found for the taxpayer. They asked what a purposive construction of s 59A should be and whether it was intended to apply to the transactions viewed realistically, and concluded that if the simple test in s 59A (LLP + trade or business + view to profit = transparent) was satisfied as regards the LLP’s activities as a whole, then that was that. Section 59A wasn’t an anti-avoidance measure, and HMRC couldn’t use Ramsay to make it one or insert a purpose test where none existed; whatever the purpose of the business carried on, one was being carried on (there was activity, however intermittent) and it had a view to profit (it made some). HMRC tried again at the UT and were (very gently) slapped down.
Now, before we get too excited, this is only a UT decision. I would be surprised if HMRC don’t have another go and try to get the Court of Appeal on board. We’ve seen this before with Altrad Services Ltd (formerly Cape Industrial Services Ltd) v HMRC [2024] EWCA Civ 720 where the Court of Appeal (re)applied the Ramsay principle to overturn the UT decision in a capital allowances tax scheme. But while we can, let’s bask in the afterglow of the courts applying the law, before they find reasons to agree with HMRC.
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