The appellants were five limited liability partnerships (LLPs) (known as ‘Icebreaker Partnerships’). In essence, individual members who participated in an LLP contributed money to it (e.g. 100), some of which was their own (generally 20), with a larger amount being borrowed (80), in order to provide finance for a range of creative projects.
Each LLP claimed to have made a significant trading loss in its first year, which the individual members sought to claim as an allowable loss against their income tax liabilities. The appellants appealed against decisions of HM Revenue and Customs disallowing expenditure by the LLPs, which they claimed to be the trading losses. They unsuccessfully appealed to the First-tier Tribunal (FTT), and subsequently appealed to the Upper Tribunal (UT).
The UT considered that the borrowing of the 80 and its payment by the appellants to a ‘principal exploitation company’ was
