Muller UK & Ireland Group LLP & Ors v The Commissioners for HMRC
Decision date: 22 February 2023
Neutral citation: [2023] UKFTT 221 (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 intangible assets transferred into a UK LLP in 2013 fell within the Part 8 intangible regime when profits are computed “as if a UK resident company carried on the trade” under s.1259 CTA. The Tribunal held the statutory fiction must be given the ownership attributes necessary to apply Part 8 and s.835, so the corporate members were “related parties” of the notional company and the assets did not enter Part 8; alternatively, FA 2016 amendments meant debits accruing on/after 25 November 2015 were excluded. Appeals were dismissed.
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
A statutory fiction used to compute taxable profits (s.1259) must be carried far enough to supply the characteristics needed to apply the computational code it invokes (here Part 8), including imputing ownership of the notional company to match the partnership, and defined tests such as the s.835 “related party” test are therefore applied to that notional company on the basis of the partnership’s ownership; accordingly, where corporate members effectively owned the partnership, the notional company failed the Part 8 gateway and the assets were outside Part 8. As an alternative point, amendments to a statutory definition that take effect before the accounting periods in which debits accrue can be applied to exclude those later debits.
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 Tribunal observed (obiter) that explanatory notes and commencement drafting can inform statutory construction but cannot override clear language, that courts in limited circumstances may correct obvious drafting errors to effect Parliament’s purpose, and that practical difficulties in applying corporate concepts to notional companies (e.g. variable profit shares) do not by themselves prevent applying company-based definitions.