Muller UK and Ireland Group LLP & Ors v The Commissioners for HMRC

For corporation tax, a statutory direction to calculate an LLP’s profits as if its trade were carried on by a UK-resident company requires the hypothetical company to reflect the LLP’s real-world ownership and control, at least so far as necessary to apply the related-party gateway in Part 8 of the Corporation Tax Act 2009. The fiction extends to consequences needed to make the calculation work, but no further than the statutory purpose requires. Amortisation debits are unavailable where the assets were acquired from related parties and no statutory exception applies. Amendments made by the Finance Act 2016 apply to accounting periods beginning on or after 25 November 2015, even where the assets were acquired earlier. An obvious drafting error may be corrected where Parliament’s purpose, inadvertence and the substance of the intended correction are clear.

Corporate members of a multinational dairy group transferred their trades, brands, licences, software and goodwill to an LLP in return for membership units. The assets were recorded at fair value and amortised over five years. The appellants claimed corresponding debits in computing the LLP’s profits for corporation tax purposes.

HMRC denied the debits, relying on the related-party gateway in Part 8 of the Corporation Tax Act 2009. The First-tier Tribunal decided in HMRC’s favour: [2023] UKFTT 221 (TC). The Upper Tribunal reached the same conclusion: [2024] UKUT 273 (TCC). The Court of Appeal considered the scope of the statutory fiction for calculating LLP profits, the temporal effect of amendments made by section 52 of the Finance Act 2016, and whether a drafting error in section 882(5B) could be corrected.

The appeal was dismissed on all grounds. Sir Launcelot Henderson gave the judgment, with which Asplin LJ and Lewison LJ agreed.

1. The authoritative approach to statutory deeming provisions is found in Fowler v Revenue and Customs Commissioners [2020] UKSC 22. The extent of the fiction depends primarily on statutory construction, including the statutory purpose and the persons between whom the fiction operates. The court must give effect to consequences which inevitably flow from the fiction, while avoiding effects outside its purpose unless clear language requires them.
2. Section 1259(3) of the Corporation Tax Act 2009 requires the LLP’s profits to be calculated by reference to the actual trade, treated as carried on by a notional UK-resident company. The notional calculation cannot be performed in a vacuum. The ownership and control characteristics of the LLP must therefore be attributed to the notional company, at least for applying the related-party gateway in section 882. This does not require attribution of every possible corporate characteristic.
3. Part 8 applies only if the gateway in section 882 is satisfied. The appellants bore the burden of showing that the assets were acquired from a person who was not a related party. The Corporate Members and the notional company were related parties on the required assumptions. Since none of Cases A, B or C applied, the gateway was closed and the amortisation debits were unavailable.
4. The amendments made by section 52 of the Finance Act 2016 apply to deductions claimed in accounting periods beginning on or after 25 November 2015. Since corporation tax is an annual tax, the amended section 882 governs deductions claimed in those periods, even where the relevant assets were acquired before the commencement date.
5. Section 882(5B) contained an obvious drafting error. Applying Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586, the court was abundantly sure of the intended purpose, the inadvertence and the substance of the correction Parliament would have made. The provision could therefore be read so that, where section 1259 applies, references to a company in section 882 operate by reference to the firm. The correction was straightforward and did not amount to judicial legislation. Pollen Estate Trustee Co Limited v Revenue and Customs Commissioners [2013] EWCA Civ 753 provided a helpful fiscal illustration.

• Court of Appeal (Civil Division): In [2026] EWCA Civ 248, the appeal from the Upper Tribunal was dismissed on all grounds.
• Upper Tribunal (Tax and Chancery Chamber): In [2024] UKUT 00273 (TCC), the appeal was decided in HMRC’s favour.
• First-tier Tribunal (Tax Chamber): In [2023] UKFTT 221 (TC), the appellants’ challenge to HMRC’s conclusions was rejected.