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BlackRock Holdco 5 LLC issued several tranches of loan notes to its parent company LLC4 as part of the acquisition of Barclays Global Investors. It claimed deductions on the interest paid on the loans. HMRC disallowed the debits arising to LLC5 on the basis that the loans differed from those that would have been made between independent enterprises and that securing a tax advantage was a main purpose of the taxpayer being a party to the loan relationship.
The First-tier Tribunal allowed LLC5’s appeal but the Upper Tribunal overturned that decision. The taxpayer appealed.
In the Court of Appeal Lady Justice Falk considered that the Upper Tribunal had erred in accepting HMRC’s argument that the transfer pricing provisions did not permit third-party covenants to be hypothesised.
She said the critical starting point was that the Organisation for Economic Co-operation and Development guidelines on transfer pricing made clear that...
