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Group debt restructuring involved a tax advantage and a tax avoidance purpose

By Mark McLaughlin, February 2023

In relation to the loan relationships unallowable purpose test and an intra-group restructuring of debt, the First-tier Tribunal had not erred in holding that the utilisation of ‘trapped’ losses in an intermediate holding company was a ‘tax advantage’ or in finding a tax avoidance purpose but the FTT’s attribution of debits to the unallowable purpose was upheld. 

The appellant group company members were involved in the restructuring of the group’s intra-group debt. The impetus for the restructuring was that an intermediate holding company in the Kwik-Fit group (Speedy) had brought forward non-trading loan relationship deficits of £48 million. This amount could shelter interest receipts in the hands of Speedy from corporation tax but was regarded as ‘trapped’ within Speedy because the corporation tax regime at that time did not allow Speedy to surrender it by group relief to other companies. 

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