The UK tax authority’s approach to purpose-based enquiries
The UK tax authority, HM Revenue & Customs (HMRC), recently published (substantially) revised guidance on the loan relationship unallowable purpose rules. In the article available at the link below, Helen Buchanan and Sarah Bond, partners in our London Tax team, discuss the revised guidance highlighting that it helpfully confirms a number of technical points emerging from recent case law as well as giving an indication of HMRC’s practical approach to unallowable purpose enquiries, including its focus on contemporaneous documentary evidence.
The article also explains that the guidance and accompanying examples illustrate a number of factors that HMRC considers relevant to whether or not the borrowing company has a tax purpose, such as whether the arrangements are UK base erosive, are the result of complex structuring, or include shareholder debt, which will also be of relevance to corporate groups considering other purpose-based anti-avoidance rules.
This article was originally published in Tax Journal on 2 June 2023.