[2024] UKUT 00152 (TCC)

The OECD materials referred to above make it clear that the artificial use of a conduit company is a prime example of the improper use of the UK-Ireland treaty at which Article 12(5) is targeted. However, even on a purposive interpretation of Article 12(5), that article cannot be interpreted as confined to cases which involve only “artificial” steps or arrangements. Article 12(5) makes no reference to concepts such as “artificiality”. If the contracting States had intended to catch only those matters, they could very easily have made express provision in those terms. Indeed, as HMRC submitted, the previous version of the UK-Ireland treaty with its exclusion for bona fide commercial arrangements served to limit the nature of the arrangements to which Article 12(5) applied. The absence of a similar exclusion in the revised treaty reinforces our conclusion.

Accordingly, we reject BLM’s Respondent’s Notice that the FTT erred in failing to limit the application of Article 12(5) to the creation or assignment of debt claims involving only “artificial” steps or arrangements.