UK: Deductibility of unamortized issue and discount costs; qualification as partnership for purposes of land transaction tax partnership relief rules
Recent decisions of Upper Tribunal and First-tier Tribunal
The Upper Tribunal held in UK Care No. 1 Ltd v Revenue and Customs that a Guernsey company that migrated to the UK and then redeemed a previously issued loan was entitled to deduct unamortized issue costs and discount allocable to the post-migration period of the loan, but not the unamortized issue costs and discount allocable to the pre-migration period of the loan or the premium and penalty paid to the loan holders upon redemption.
HMRC had sought to deny the taxpayer’s deduction of all such costs on the grounds that they were incurred on the original issue date, but the court found that it is “economically sensible” to spread the issue and discount costs over the life of the loan.
Read a March 2026 report prepared by the KPMG member firm in the UK
In addition, the First-tier Tribunal held in COMFG Holdings Ltd v Welsh Revenue Authority held that a sale of a commercial property by trustees (two individuals and a professional trustee) of a small self-administered scheme (SSAS) to a company they controlled did not qualify for partnership relief under the Welsh land transaction tax (LTT) partnership rules because the trustees’ investment activities did not meet the legal definition of a partnership.
The court found that the trustees acted only in their trust capacity and their activities did not constitute a partnership, as evidenced by the facts that the property was held and managed solely within the SSAS trust structure (per the trust deed, scheme rules, sale documents, and scheme accounts), and there was no partnership agreement, partnership accounts, or partnership tax filings, and all property income went into the SSAS fund, not to the individuals.
KPMG observation
This decision is significant beyond LTT, as the partnership relief rules are substantially the same for stamp duty land tax (SDLT) and land and buildings transaction tax (LBTT).
Read a March 2026 report prepared by the KPMG member firm in the UK