UK Care No 1 Limited v The Commissioners for HMRC
Decision date: 13 June 2024
Neutral citation: [2024] UKFTT 542 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This case concerned whether parts of a c.£150.75m loan relationship debit taken by UK Care No 1 Ltd on early redemption of loan notes after it migrated to UK tax residence were "referable" to the pre-migration period and therefore disallowable under s 327 CTA 2009. The Tribunal held that about £93.903m of the loss was referable to pre-migration market movements and pre-migration expenses and so was disallowed, while c.£56.845m (the penalty element) was allowable. The Tribunal also held the redemption payment/debit constituted a loss arising in connection with a loan relationship for s 327 purposes.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
The tribunal applied an objective, purposive test of "referable", judged by commercial reality assessed with hindsight by an informed independent observer; under that test changes in market conditions (eg interest rates, credit spreads) and expenses incurred before migration can make a later-crystallised loss referable to the pre-migration period and therefore caught by s 327 CTA 2009.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The judgment indicated that fair value at the migration date is primarily a quantification tool but can inform whether a loss existed in commercial reality before migration (supported by s 327(7)'s treatment of fair value accounting), and that the taxpayer's subjective intentions about realisation are irrelevant to the objective assessment of referability.