In this episode, Ian Hyde, head of tax disputes and Matt Greene, an associate director in the team, discuss the implications of the recent Upper Tribunal decision in the Blackrock case. Ian and Matt examine how the structure used by the Blackrock group to purchase a UK resident, US incorporated Limited Liability Company ("LLC") was treated under the transfer pricing rules.
The two key issues that cropped up were:
- whether interest paid by the LLC was an arm's length provision and
- even if it was, should the loan relationship debits be disallowed for having an unallowable purpose.
The Upper Tribunal decided that applying the arm's length principle requires the "economically relevant characteristics" between the actual transaction and a hypothetical transaction between independent enterprises to be sufficiently comparable. The podcast examines those characteristics and also delves into the Upper Tribunal's decision on the purpose of the transaction (and the question of the just and reasonable apportionment between more than one purpose).
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