Muller Uk & Ireland Group Llp and Others v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Neutral Citation | [2024] UKUT 273 (TCC) |
| Year | 2024 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
2024 June 25, 26; Sept 6
Revenue - Corporation tax - Deductions - Statutory fiction that profits of partnership with corporate members calculated as if partnership were notional company - Whether corporate members entitled to claim deduction regarding intangible fixed assets acquired by partnership from corporate members - Whether statutory fiction having effect that corporate members incapable of being “related parties” with respect to partnership -
Three companies in the same group (“the corporate members”) transferred their trade, intellectual property and goodwill to a limited liability partnership (“the LLP”) in exchange for membership units in the LLP. In computing the LLP’s profits for inclusion in the corporate members’ tax returns, the corporate members claimed a deduction under Part 8 of the Corporation Tax Act 2009F1 in respect of the amortisation of the intellectual property and goodwill, which were (or were to be treated as) “fixed intangible assets” for the purposes of Part 8. The revenue issued a closure notice as against each corporate member disallowing the deduction claimed, on the basis that Part 8 did not apply to the intellectual property and goodwill because the LLP had acquired them from a “related party” within section 882(1)(b) of the 2009 Act, namely the relevant corporate member. The LLP and the corporate members appealed, contending that they could not be “related” within section 882 since that section fell to be applied to the notional company posited under section 1259 of the 2009 Act, which provided that where a member of a partnership was a company the amount of the partnership’s profits were taken to be the amount of the profits of the partnership’s trade that would be chargeable to corporation tax if a notional company carried on the trade. The First-tier Tribunal dismissed the appeal, holding that the corporate members had “control” of the notional company for the purposes of sections 835 and 836 of the 2009 Act with the consequence that they and the LLP were “related” within section 882.
On further appeal by the LLP and the corporate members—
Held, dismissing the appeal, that the broad concept of “control” of a company as defined in section 836 of the Corporation Tax Act 2009 was capable of applying to the relationship between members of a partnership (including a limited liability partnership) and that partnership in a context in which section 1259 of the 2009 Act directed that such partnership be treated as if it were a notional company for the purpose of computing its profits; that, in such circumstances, what mattered was whether “control” of the partnership by the members was established, it not being necessary for there to be a determination of whether or how holdings of membership units might translate into some kind of corporate analogue of shareholding or guarantee rights; that, further, the “related party” provisions in sections 835 and 882 of the 2009 Act were capable of extending to the notional company posited by section 1259, which was to be treated as having the ownership attributes of the relevant partnership; that, thus, the extent of the deeming required by section 1259 would be commensurate with its statutory purpose of calculating the profits of a partnership which fell within its terms, an exercise which included determining what, or the extent to which, amounts were to be included within that process by checking that the “related party” exception in section 882 did not apply; that, in other words, given that the notional company posited in section 1259 was there to fulfil a calculation purpose its characteristics could not be viewed in isolation but had to be considered in the context of the particular calculation provision sought to be applied, which in the present case included whether there was a relationship of control between the corporate members and the LLP and, in turn, whether each of the corporate members was a “related party” in relation to the LLP; and that, accordingly, the First-tier Tribunal had not erred in its conclusion (post, paras 39–49, 68, 94).
The following cases are referred to in the judgment:
BCM Cayman LP v Revenue and Customs Comrs
DCC Holdings (UK) Ltd v Revenue and Customs Comrs
Fowler v Revenue and Customs Comrs
Inco Europe Ltd v First Choice Distribution [
Pollen Estate Trustee Co Ltd v Revenue and Customs Comrs
R (Derry) v Revenue and Customs Comrs
R (O) v Secretary of State for the Home Department
R (Westminster City Council) v National Asylum Support Service
Rossendale Borough Council v Hurstwood Properties (A) Ltd
The following additional cases were cited in argument or referred to in the skeleton arguments:
Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [
Flora v Wakom (Heathrow) Ltd
GDF Suez Teesside Ltd (formerly Teesside Power Ltd) v Revenue and Customs Comrs
NCL Investments Ltd v Revenue and Customs Comrs
Northern Gas Networks Ltd v Revenue and Customs Comrs
R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [
R (JB (Jamaica)) v Secretary of State for the Home Department
APPEAL from the First-tier Tribunal (Tax Chamber)
The Revenue and Customs Commissioners issued closure notices in respect of the tax returns of Muller UK & Ireland Group LLP (“LLP”) and Muller Dairy UK Ltd, Robert Wiseman & Sons Ltd and TM UK Production Ltd (“the corporate members”) for the tax years ended 5 April 2014, 2015, 2016, and 2017, by which the revenue refused to allow deductions to corporation tax under Part 8 of the Corporation Tax Act 2009 on the basis that LLP and the corporate members were “related parties” within the meaning of section 882 of that Act. LLP and the corporate members appealed against the closure notices. By a decision dated 22 February 2023 the First-tier Tribunal (Tax Chamber) (First-tier Tribunal Judge Beare and John Woodman) [2023] UKFTT 221 (TC) dismissed the appeals.
Pursuant to permission granted by the First-tier Tribunal, LLP and the corporate members appealed on the grounds that the First-tier Tribunal had erred in law by attributing the ownership characteristics of a partnership to a notional company under section 1259(3) of the 2009 Act and that the “related party” exception should not be considered when computing profit under that section.
The facts are stated in the judgment, post, paras 1–5, 7–11.
Peter Trevett KC and Francis Fitzpatrick KC (instructed by
Christopher Tidmarsh KC, Imran Afzal, Tomos Rees (instructed by
The Upper Tribunal took time for consideration.
6 September 2024. TROWER J and UPPER TRIBUNAL JUDGE RAGHAVAN handed down the following judgment.
Introduction1 The appellants are producers, marketers and distributors of dairy products in the UK and the Republic of Ireland and are part of the Muller Group, the well-known dairy product multinational. In 2013 the second, third and fourth appellants (the “Corporate Members”) transferred their trade together with intellectual property (such as trademarks and domain names) and goodwill to the first appellant (“LLP”) in return for membership units of LLP. After the transfers had occurred the transferred assets were recorded at their fair value in LLP’s accounts and then amortised over five years.
2 The question of how profits of a partnership are calculated when a member of the partnership is a company is addressed by section 1259 Corporation Tax Act 2009 (“CTA 2009”), a provision within Part 17 CTA 2009, the scope of which is at the heart of this appeal. The profits of the trade are taken to be the amount that “(3)(a) … would be the amount of the profits of the trade chargeable to corporation tax … if a UK resident company carried on the trade”. Section 1259(3) therefore directs a statutory fiction whereby profits are calculated in respect of what both parties and the First-tier Tribunal (Tax Chamber) (“FTT”) called a notional company. Section 1273 CTA 2009 provides that a limited liability partnership, which is carrying on a trade with a view to profit, is to be treated for corporation tax (“CT”) purposes as if it were a partnership.
3 The central issue of statutory interpretation with which this appeal is concerned relates to the interaction between section 1259 and the intangible assets provisions within the CT regime. The intangible assets provisions are contained within Part 8 CTA 2009 and entitle companies to claim debits on the amortised depreciation of intangible assets such as intellectual property and goodwill which have been acquired. This entitlement is, however, only available if the acquirer is not a “related...
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