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Payments did not qualify

24 July 2009
Issue: 4216 / Categories: Tax cases
Prudential plc v CRC, Court of Appeal, 25 June 2009

The taxpayer company Prudential made two foreign exchange hedging transactions one with the Royal Bank of Scotland and the other with Goldman Sachs. Prudential claimed amounts paid at the inception of the swap agreements in its corporation tax self assessment return.

HMRC denied the claim saying that the payments were not qualifying payments within FA 1994 s 153.

They were no more than prepayments of part of the final exchange of principal under the hedging agreements.
The Special Commissioners and High Court agreed with HMRC so the taxpayer appealed.

The main issue before the Court of Appeal was whether the two front-end payments were made in consideration of RBS and Goldman Sachs entering into their currency contracts.

The Court of Appeal said that the prepayments did not come within FA 1994 s 151(1)(b).


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