Judgment in the GCH tax litigation

The taxpayers have succeeded before the First-tier Tribunal Tax Chamber in five joined appeals against assessments to Capital Gains Tax or Corporation Tax levied in relation to a hedge fund/family office LLP, a company, and three family trusts.

Oliver Marre represented the five successful appellants.

The substantive issue in each appeal was whether GCH Active LLP was trading or carrying out business with a view to profit for the purposes of section 59A Taxation of Chargeable Gains Act 1992, when loan notes representing the sale consideration for the purchase of a significant shareholding in a PLC were transferred to it.  The appellants argued that it was, and so the transfers made by the other entities (each of which being a member of the LLP) were tax neutral.  HMRC contended that the LLP was not trading or in business with a view to profit, so each of the other appellant entities made taxable disposals.  The First-tier Tribunal (Judge Tilakapala and Tribunal Member Neill) heard evidence and submissions in September 2023.  The Tribunal has now held that the LLP was in business with a view to profit, so the appeals succeeded.

There were also two procedural issues in the case.  First, whether HMRC had made discoveries as regards the trusts to support certain discovery assessments.  HMRC were put to proof in showing that an officer had made a discovery, and the Tribunal held that they had successfully discharged the burden of proof.  Secondly, the scope of the appeal.  The taxpayers argued that the matters before the Tribunal were circumscribed by the assessments issued by HMRC, together with HMRC’s Statement of Case and a list of issues agreed between the parties.  The Tribunal accepted these submissions and held that it was not, therefore, open to the Tribunal to consider wider matters.

The full decision is available here.