Jurisdiction(s):
United Kingdom

England and Wales Court of Appeal: recurring short-term loans are yearly interest; UK to UK ITA 2007 s 933 exemption disapplied—recipient not beneficially entitled

Published on: 17 April 2024

Published by a LexisNexis Tax expert

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Article summary

Hargreaves Property Holdings Ltd v HMRC [2024] EWCA Civ 365

The background

The borrower, a UK-resident taxpayer and the parent of a group active in UK property investment, financed its business and activities with loans from a large number of lenders. In 2004, the loan arrangements were altered with the objective that the interest would not be chargeable to UK tax, ultimately so:

each lender transferred its entitlement to interest (and likewise to principal) to a Guernsey-resident vehicle for consideration very shortly before the interest fell due for payment—from 2012, once assigned to the Guernsey entity, the interest was subsequently transferred again to Houmet, a UK-incorporated and UK tax-resident company
just one or two days after the assignment, the interest was paid and the principal also repaid, and
the same lender then made a fresh advance equal to or greater than its prior loan to the same borrower—the new advance being financed by the proceeds of the assignment

This pattern of assignment, repayment and re-lending typically took place yearly, or occasionally at longer intervals instead.

What did the Court of Appeal decide?

The Court of Appeal rejected the borrower’s contention that the UT’s decision was defective. The Court of Appeal...

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