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ARTICLE · 03 SEPTEMBER 2024

Recognising "Imported Losses" Under The UK's Loan Relationship Rules

Hogan Lovells Cadwalader
Hogan Lovells Cadwalader
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Hogan Lovells Cadwalader

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The UK Care No 1 Ltd v HMRC [2024] case is the first to interpret the Imported Loss Rules under the UK's Loan Relationships Regime. The First-tier Tribunal (FTT) ruled that "losses" are referable to pre-migration periods if an informed third party would objectively see them as arising from that period. Approximately £94 million in losses were disallowed as they were deemed to exist due to pre-migration market changes. This case clarifies the application of these rules for companies entering...

United StatesTax
Hogan Lovells Cadwalader
Hogan Lovells Cadwalader
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Background

The United Kingdom ("UK") has specific corporate tax rules on the taxation of loan relationships (parts 5 and 6 of the Corporation Tax Act 2009 (the "Loan Relationships Regime")). The Loan Relationships Regime contains rules at section 327 of the Corporation Tax Act 2009 which disallow relief for any "losses" that are wholly or partly referable to a time when the loan relationship was not subject to UK taxation (the "Imported Loss Rules").

The recent First-tier Tribunal ("FTT") case of UK Care No 1 Ltd v HMRC [2024] UKFTT 542 (TC) is the first case to consider the Imported Loss Rules, and considers how those rules, and in particular the test of "referability", should be applied.

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