In the case of Burlington Loan Management DAC v HMRC [2026] EWCA Civ 461, the Court of Appeal has dismissed HMRC’s appeal against the previous UT and FTT decisions that found in favour of the company (see the Claritax News story). The Court of Appeal also dismissed the company’s Respondent’s Notice.
At The Court of Appeal, Lord Justice Snowden summarised the position to date as follows:
“This appeal concerns the tax treatment of interest received by the Respondent (‘BLM’) in respect of a debt claim in the administration in England of Lehman Brothers International (Europe) (‘LBIE’ and the ‘LBIE administration’).
BLM is resident in the Republic of Ireland. BLM purchased the rights to the claim (the ‘SAAD Claim’) in February 2018, by way of a back-to-back assignment via a broker (the ‘Assignment’) from SAAD Investments Company Ltd (‘SICL’), a company resident in the Cayman Islands.
The issue is whether BLM’s entitlement to receive about £90.8 million of post- administration interest in respect of the SAAD Claim was exempt from UK withholding tax (‘UK WHT’) by virtue of Article 12 of the UK-Ireland double taxation treaty signed on 2 June 1976 (as amended by protocols from time to time) (‘Article 12’ and the ‘UK-Ireland Treaty’). …
… The First Tier Tribunal (‘FTT’) and the Upper Tribunal (‘UT’) both held that the payment of interest to BLM from the LBIE administration was taxable only in Ireland by reason of Article 12(1). HMRC appeals on the basis that the FTT and UT should have found that Article 12(1) was disapplied by Article 12(5) because ‘the main purpose or one of the main purposes’ of BLM was ‘to take advantage of [Article 12] by means of [the] assignment’ of the SAAD Claim.”
The central issue was “whether the concept in Article 12(5) of having a main purpose to ‘take advantage of’ Article 12(1) simply means to have a main purpose of ‘obtaining the benefit of’ that article, or whether it means something else.” Considering the matter, Lord Justice Snowden agreed with Popplewell LJ’s conclusion in VietJet that:
“to ‘take advantage’ of a provision such as Article 12(1), within the meaning of an anti-abuse provision such as Article 12(5), cannot simply be synonymous with to ‘obtain the benefit’ of that provision. That would have the result that the treaty would be self-defeating. As Popplewell LJ held, ‘to take advantage of’ the article in question must mean obtaining the benefit of the article in a way that is contrary to the object and purpose of the treaty. In my view, that approach is evident, in particular, from Paragraph 9.5 of the Commentary. …
…. As I have indicated, and as stated in the Commentary at paragraph 7, the principal purpose of double tax conventions is for the convention states to encourage commerce between them by ensuring that their residents are not subject to international double taxation. By using a provision in the form of Article 12(1), the contracting states fulfil this aim by agreeing that only one state will levy tax in the situation in question, and that the other will provide the taxpayer with an exemption from tax or the ability to claim tax relief.
It must follow, as Popplewell LJ held in Vietjet at paragraph 108, that without more, it cannot be an abuse for a taxpayer who is resident in one of the contracting states to acquire a debt-claim in the expectation that he will enjoy the very benefit of exemption from tax which the treaty expressly provides that someone in his position is to have.”
Lord Justice Snowden therefore concluded that:
“BLM was an independent entity which had, for some considerable time, conducted a business on its own account by acquiring claims made in the administration of LBIE. BLM believed that because it was tax-resident in Ireland, Article 12(1) applied to it, so that if it beneficially acquired a debt-claim in the administration of LBIE, it would not be taxed in the UK on the interest paid on that claim and would only be taxed in Ireland. BLM made its offer for the SAAD Claim at arm’s length on that basis. In my judgment, in the absence of anything more, BLM did not have a purpose to “take advantage” of Article 12(1) within the meaning of Article 12(5).”
https://www.bailii.org/ew/cases/EWCA/Civ/2026/461.html
Related content from Claritax Books
Advising British Expats is a detailed guide to the tax issues arising for individuals who leave the UK to live and work abroad. Written for accountants and other professional tax advisers, the book also includes commentary on individuals coming to work in the UK.
