Jurisdiction(s):
United Kingdom

First FTT decision on CTA 2009 s 327 imported loss rule: £94m loan relationship loss referable to pre-migration non-UK residence disallowed (UK Care No 1 Ltd v HMRC)

Published on: 01 July 2024

Published by a LexisNexis Tax expert

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Article summary

UK Care No 1 Ltd v HMRC [2024] UKFTT 542 (TC)

The FTT examined the operation of the ‘imported losses’ restriction contained in CTA 2009, s 327. Under that code, relief for a loss arising on a loan relationship is denied to the extent the loss is properly referable to a period during which the company attempting to bring it into account would not have been chargeable to corporation tax on any profits from that same loan relationship. The appellant, which was tax resident in Guernsey, had issued certain loan notes that were secured over the BUPA group’s UK care home undertaking. In 2016, BUPA sought to sell a number of care homes that constituted part of the security package supporting the notes. To enable those transactions to proceed, BUPA acquired the appellant, with the result that the appellant became UK tax resident, following which the notes were redeemed by the appellant itself. The loan notes incorporated a ‘Spens’ (or ‘make whole’) provision; broadly, this meant that on an early redemption the appellant would be required to pay an amount materially exceeding market value, because the specified discount rate applicable under such a clause did not take into account any...

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