UT (Tax & Chancery) UT/2023/000062 - [2024] UKUT 00273 (TCC)

We can set out the background facts briefly. These are taken from a selection of the facts the FTT found, which it in turn had sourced from the parties’ agreed facts. We also refer to the LLP agreement.

On 7 May 2013, LLP was incorporated by the Corporate Members: Muller Dairy UK Limited (“MDUK”), Robert Wiseman & Sons Limited (“RWS”) and TM UK Production Limited (“TMUK”), who were all resident for tax purposes in the UK. Each Corporate Member was a wholly owned direct or indirect subsidiary of TM Dairy (UK Holding) Sarl (“TM Dairy”), incorporated in Luxembourg.

On 1 July 2013,pursuant to asset transfer agreements dated 28 June 2013, the Corporate Members transferred their trades, including certain intangible fixed assets (brands, licenses and software) and goodwill to LLP in return for Membership Units in LLP.

The term “Membership Unit” was defined in the LLP Agreement as:

“one unit in the capital of the LLP having a nominal value of £1 each.”

The Membership Units were received in the following proportions, comprising the entirety of what was described in the agreed facts annexed to the FTT’s decision as the Equity Interest in LLP: MDUK: 51.21%, RWS: 29.63%, TMUK: 19.16%. The proportions were set by reference to the value of the assets transferred.

The transferred assets were recorded in LLP’s accounts at their fair value and were amortised over five years on a straight-line basis. In computing LLP’s profits for inclusion in the Corporate Members’ tax returns, a deduction was claimed for amortisation of the transferred assets for the accounting periods ending 31 December 2013, 2014, 2015, 2016, 2017 and 2018. HMRC opened enquiries into the tax returns of each of LLP and the Corporate Members for the tax years ended 5 April 2014, 2015, 2016 and 2017. The appeals to the FTT were against the closure notices HMRC issued to LLP and the Corporate Members.