BCM Cayman LP & Anor v The Commissioners for HMRC
[2023] EWCA Civ 1179
Muller UK and Ireland Group LLP & Ors v The Commissioners for HMRC
6 September 2024
[2024] UKUT 273 (TCC)
Upper Tribunal
Imagine a company made up of other companies. Can it deduct expenses related to things it bought from the other companies that made it up? The court said yes, because the rules for calculating the made up company's profit must consider who owns it and what it did, therefore including the related-party test.
Key Facts
- •Muller UK & Ireland Group LLP (LLP) and three corporate members (Corporate Members) transferred trades and intangible assets to the LLP.
- •HMRC denied the LLP's deduction for amortisation of these assets, claiming the parties were related.
- •The dispute centered on the interaction of Part 8 (intangible assets) and Part 17 (partnership profit calculation) of CTA 2009.
- •Section 1259 CTA 2009 requires calculating partnership profits as if a notional UK resident company carried on the trade.
- •The appellants argued the notional company's ownership characteristics shouldn't be attributed to the LLP, thus avoiding the 'related party' exception in Part 8.
- •The FTT ruled against the appellants, finding the notional company's control reflected the LLP's ownership.
- •The Upper Tribunal considered whether the ownership characteristics of the partnership should be attributed to the notional company.
Legal Principles
Statutory interpretation requires identifying the legislation's purpose.
Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16
The extent of a statutory fiction is determined by the statute's purpose; it shouldn't produce unjust results unless compelled by clear language.
Fowler v HMRC [2020] UKSC 22; DCC Holdings (UK) Ltd v IRC [2011] 1 WLR 44
Statutes must be considered as a whole; words and passages derive meaning from their context.
R(O) v Home Secretary (SC(E)) [2022] UKSC 3
The concept of 'control' in s836 CTA 2009 is broad, encompassing various methods of securing influence, not just shareholding.
Sections 836, 838(4), 843 CTA 2009
Before correcting drafting errors, courts must be sure of the statute's purpose, the inadvertence of the error, and the intended substance.
Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586; Pollen Estate Trustee Co Ltd v HMRC [2013] EWCA Civ 753
Outcomes
Appellants' appeals dismissed.
The Upper Tribunal held that the notional company under s1259 CTA 2009 should reflect the ownership characteristics of the LLP for the purpose of calculating profits, including the application of related party rules. The court found that excluding the related party test would leave a crucial part of the calculation process missing. A drafting defect in FA 2016 was also addressed under the Inco Europe principles.
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