Oxford Instruments UK 2013 Limited v The Commissioners for Her Majesty's Revenue & Customs, TC 07094
| Jurisdiction | UK Non-devolved |
| Judge | Tony BEARE |
| Judgment Date | 13 April 2019 |
| Neutral Citation | [2019] UKFTT 0254 (TC) |
| Respondent | The Commissioners for Her Majesty's Revenue & Customs |
| Appellant | Oxford Instruments UK 2013 Limited |
| Reference | TC 07094 |
| Court | First-tier Tribunal (Tax Chamber) |
[2019] UKFTT 0254 (TC)
FIRST-TIER TRIBUNAL
TAX CHAMBER
TC07094
Appeal number: TC/2017/07785
BETWEEN
OXFORD INSTRUMENTS UK 2013 LIMITED
Appellant
-and-
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS
Respondents
TRIBUNAL:
JUDGE TONY BEARE
Sitting in public at Taylor House, 88 Rosebery Avenue, London EC1R 4QU on 26 and
27 March 2019
Mr Julian Ghosh QC and Mr Charles Bradley, instructed by Ashurst LLP, for the
Appellant
Ms Elizabeth Wilson, instructed by the General Counsel and Solicitor to HM Revenue
and Customs, for the Respondents
CORPORATION TAX – loan relationship rules – whether a note issued as part of a
structure for refinancing the US sub-group without generating net taxable interest income
in the UK had an unallowable purpose – yes – extent of deductions referable to the
unallowable purpose considered
1
DECISION
INTRODUCTION
1. This decision relates to the potential application of Section 441 of the Corporation Tax
Act 2009 (the “CTA 2009”) (Loan relationships for unallowable purposes) to a loan
relationship entered into in the course of a structure established for the purposes of
refinancing the US sub-group of the group headed by Oxford Instruments Plc (“OI Plc”) (the
“Oxford Instruments Group”).
BACKGROUND
2. The appeal to which this decision relates is by Oxford Instruments UK 2013 Limited (the
“Appellant”), a UK resident subsidiary in the Oxford Instruments Group. The Appellant has
appealed against the conclusions stated in, and the company tax return amendments made by,
the Respondents in a closure notice dated 30 March 2017 in respect of the Appellant’s
accounting period ending 31 March 2014. Those conclusions were that the Appellant was not
entitled to any relief for the interest which had accrued in respect of a promissory note with a
principal amount of $140m (the “$140m Promissory Note”) which it had issued to its US
resident immediate parent company, Oxford Instruments Holdings 2013 Inc (“OI 2013 Inc”),
on 31 March 2013 because:
(1) the Appellant had an “unallowable purpose” (as defined in Section 442 of the CTA
2009) in entering into, and remaining party to, the $140m Promissory Note;
(2) all of the interest which had accrued under the $140m Promissory Note in respect
of the relevant accounting period was attributable to that unallowable purpose; and
(3) therefore, all of the debits which would otherwise have fallen to be taken into
account for corporation tax purposes under the loan relationships legislation in Part 5 of
the CTA 2009 in respect of the $140m Promissory Note were precluded by Section
441(3) of the CTA 2009 from being so taken into account.
3. The grounds of the Appellant’s appeal were that, as a function of the relevant evidence
(1) the Appellant did not have an unallowable purpose in entering into, and remaining
party to, the $140m Promissory Note; and
(2) further, and in the alternative, even if the Appellant did have an unallowable
purpose in entering into, and remaining party to, the $140m Promissory Note, none of
the interest which had accrued under the $140m Promissory Note should, on the basis of
the just and reasonable apportionment required by Section 441(3) of the CTA 2009, be
regarded as being attributable to that unallowable purpose,
and that, further and in the alternative, the clearance which the Respondents had provided in
respect of the non-application of Part 6 of the Taxation (International and Other Provisions)
Act 2010 (the “TIOPA 2010”) to the structure of which the $140m Promissory Note formed
part meant that the Respondents were precluded from disallowing relief for any of the relevant
debits.
4. The final ground of appeal – the one based on the prior clearance under Part 6 of the
TIOPA 2010 - was not pursued before me at the hearing, presumably because the clearance
provided by the Respondents stated clearly that it was confined to Part 6 of the TIOPA 2010
and “[did] not provide clearance in respect of any other anti -avoidance provision”. This decision is
therefore confined to the grounds of appeal set out in paragraphs 3(1) and 3(2) above.
2
THE FACTS
5. For the purposes of the hearing, I was presented with a statement of facts which had been
agreed by the parties on the basis that “[nothing] in this statement should be taken as an acceptance
by either party of the relevance of any particular fact or facts or that any fact omitted from this statement
is not relevant.”
6. The agreed facts are set out in paragraphs 7 to 42 below and in the appendices to this
decision.
7. OI Plc is and was at all times during the relevant accounting periods the listed UK parent
company of the Oxford Instruments Group, an international group of companies. The Oxford
Instruments Group is and was at all times during the relevant accounting periods a provider of
high technology products, systems and tools for industry and research in academic markets.
The Oxford Instruments Group had operations in the UK, Europe, the US, China and Japan.
8. From August 2006 to April 2016, Kevin James Boyd was the Group Finance Director
for OI Plc. Mr Kevin James Boyd was also a director of a number of subsidiaries of OI Plc
during this time (including Oxford Instruments Overseas Holdings Ltd ("OIOH Ltd"), Oxford
Instruments Holdings 2008 Inc ("OI 2008 Inc") and Oxford Instruments Overseas Holdings
2008 Ltd ("OIOH 2008 Ltd")). During this period, Mr Tom Curtis was Director of
Accountancy, Treasury and Tax for the Oxford Instruments Group and Ms Gillian Thomson
1
was Group Tax Manager for the Oxford Instruments Group.
9. Mr Boyd, Mr Charles Holroyd and Mr Jonathan Flint were the directors of the Appellant.
They were appointed directors on 12 March 2013. The company changed from unlimited to
limited on 25 March 2013. All three were on the board of OI Plc during the relevant accounting
period
2
.
10. Mr Boyd was also a director of OI 2013 Inc. He was appointed on 19 March 2013.
11. Deloitte LLP ("Deloitte") were the retained tax advisor for the Oxford Instruments Group
until 2006 and had been for many years. Thereafter the Oxford Instruments Group used a
mixture of various tax advisors and in-house resources but Deloitte remained in regular contact.
Pre-2013 Financing of the US Sub-Group
12. In 2012 and immediately before the implementation of the ''tower structure'' (which is the
subject of the appeal), the members of the Oxford Instruments Group relevant to the appeal
were:
(1) OI plc;
(2) OIOH Ltd;
(3) OIOH 2008 Ltd;
(4) OI 2008 Inc; and
(5) Oxford Instruments Holdings Inc ("OIH Inc") (and, together with OI 2008 Inc, the
"US Sub-Group").
13. At that time, the existing debt in the US Sub-Group comprised:
(1) loan notes in the principal amount of $60 million (comprising a $50 million loan
note and a $10 million loan note both issued by OI 2008 Inc to OIOH 2008 Ltd) due to
expire on 31 March 2013 (the "$60m Loan Notes"); and
1
Note, Gillian Thomson joined the Oxford Instruments Group in 2012.
2
Note, Charles Holroyd resigned as director of OI Plc on 10 September 2013.
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