Upper Tribunal Tax and Chancery Chamber

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

Fecha: 26-Jun-2024

Grounds of appeal and parties’ submissions in outline

Grounds of appeal and parties’ submissions in outline

33.

The appellants’ grounds of appeal to the Upper Tribunal contend that the FTT erred in its analysis. The parties’ cases now focus more keenly on the proposition that the ownership characteristics of the notional company should be regarded as matching the ownership characteristics of LLP. The appellants’ key points are first that the FTT was wrong to make the specific related party rules in Part 8 inform the interpretation of s1259 given s1259 was a freestanding generic provision. There is nothing, the appellants argue, in the statutory words which suggested the assumption argued for and the FTT was wrong to dismiss the relevance of BCM UT. Second, HMRC’s concerns that the appellants’ interpretation would mean the related parties provisions could be avoided by insertion of a partnership were not a reason to read in words. The concerns were overstated in any case given the legislation contained a targeted anti-avoidance provision. Third, the appellants’ reading was consistent with the statutory history in relation to which it was acknowledged by HMRC in a Statement of Practice that the substantively same predecessor provision (s114 Income and Corporation Taxes Act 1988 (“TA 1988”)) did not, in respect of other regimes (loan relationship and derivatives) cover provisions analogous to the related party provisions.

34.

HMRC support the FTT’s decision for the reasons it gave. Their position can be summarised as follows:

(1)

the statute must be considered as a whole and the FTT’s approach was entirely consistent with the deeming required by s1259;

(2)

the FTT was right to consider BCM UT did not assist;

(3)

the appellants’ interpretation gives rise to perverse results;

(4)

the statutory history is irrelevant given the nature of the CTA 2009 as a consolidating act and in any event HMRC’s Statement of Practice is now accepted by HMRC to be incorrect, and in any case does not assist.