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In JTI Acquisition Company (2011) Limited v HMRC [2022] TC08493, the First Tier Tribunal (FTT) found that the appellant was party to a loan relationship purely to gain a tax advantage. As such the loan had an unallowable purpose and the associated interest payments amounting to over £40 million were disallowed.

Under s.441 CTA 2009, a company may not claim a deduction for interest payable on a Loan relationship, where the loan relationship is for an unallowable purpose. If only part of the loan was for an unallowable purpose, then a deduction may be allowed for a just and reasonable proportion. There is an unallowable purpose where (s.442):

JTI Acquisition Company (2011) Limited (JTI) is a UK incorporated company that was part of the Joy Global group, a mining machinery and equipment manufacturer when the disputed transactions took place. The ultimate parent was Joy Global Inc, a US company. 

The FTT dismissed the appeal finding that:

Useful guides on this topic

Loan Relationships
How are loans made to and by a company taxed? What are the rules when loans are written down? What is the difference between a trading and non-trading loan relationship? What are the rules for connected party loans? 

Loan relationships toolkit: Is a balance within the rules?
When does a balance fall within the loan relationship rules?

Withholding Tax
When is Withholding Tax (WHT) paid? What are the applicable rates? Are there any exemptions?

External link

JTI Acquisition Company (2011) Limited v HMRC [2022] TC08493

 


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