FTT deny US group their interest deductions on a commercial acquisition.

In a recent decision of the FTT (TC/2019/04496), a UK company set up as the acquisition vehicle for purchase of a complementary business has been denied a deduction for its finance costs on the basis of the “unallowable purpose” rule for loan relationships. The FTT considered all the transactions in the series and concluded that the only purpose of the loan relationship was to obtain a tax advantage in the UK, even though the finance was also used to finance the purchase of a business from a third party. The decision raises far-reaching questions about the scope for the unallowable purpose rule to apply to finance used for commercial acquisitions in the UK.

John Gardiner QC and Michael Ripley represent for the taxpayers.

The decision can  be found here.