Travel Document Service and Ladbroke Group International v HMRC

In Travel Document Service and Ladbroke Group International v HMRC [2017] UKUT 45 (7 February 2017) the UT found that a loan relationship scheme failed as a result of FA 1996 Sch 9 para 13 (unallowable purpose).

The appeal related to a tax avoidance scheme notified under DOTAS and implemented by Travel Document Service (TDS) and Ladbroke Group International (LGI). The scheme exploited a perceived loophole in the taxation of loan relationships. It involved bringing a holding of a subsidiary’s shares within the loan relationship rules by entering into a form of derivative contract known as a ‘total return swap’ in relation to them. It then depressed the value of the shares by novating a large loan liability into the subsidiary from another group company. The intended effect of these arrangements was to accrue a large loan relationship debit in the shareholding company as...