BlackRock loses UK tax appeal over Barclays Global Investors purchase in 2009
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The news: Asset management giant, BlackRock, has lost an appeal tied to UK tax it tried to reclaim from HM Revenue and Customs on its 2009 acquisition of Barclays Global Investors (BGI).
The numbers: The USD13.5 billion ($20.72 billion) purchase of BGI saw BlackRock use USD4 billion in loans from its US entities to buy the US arm of the Barclays business, however, the corporate part of the deal included a UK tax resident entity.
The context: BlackRock’s UK tax entity claimed tax relief for interest costs tied to the loans to reduce the UK tax bills of other profitable companies in the BlackRock group, by setting the tax losses against profits.
The tax dispute has been going on for years, with the first-tier tribunal originally allowing BlackRock to appeal HMRC’s decision to refuse the tax deductions, only for an Upper Tribunal to reverse the decision which was then upheld by the Court of Appeal on Thursday.
The Court found that the tax deductions for the interest on the loans were disallowed under the 'unallowable purpose rule', arguing that the UK entity’s main purpose was to gain a tax advantage.
What they said: A BlackRock spokesperson told Financial News: “BlackRock has paid all of its UK corporation tax, including the payment some time ago of all tax due in relation to this matter. The purpose of this hearing relates to the operation of a specific point of tax law. Following the Court of Appeal’s judgment, we are closely evaluating our next steps.”
The sources: UK Court of Appeal Judgment, Financial Times
