Blackrock fails appeal to cut tax bill on £10.8bn Barclays deal
The Blackrock Group has lost an appeal to reclaim tax from HM Revenue and Customs (HMRC) on its 2009 $13.5bn (£10.8bn) acquisition of Barclays Global Investors.
The asset manager’s structure Blackrock Holdco 5, LLC was used to acquire the North American investment management business of Barclays Global Investors from Barclays Bank in December 2009.
At the time, this structure was a newly formed Delaware-incorporated but UK tax resident company, which issued loan notes to its parental entity in the Blackrock group totalling $4bn.
The loan notes were issued in return for the loan Holdco 5 LLC received from its parent, Blackrock Holdco 4, LLC and were a form of intra-group financing.
HMRC disallowed a tax deduction for LLC5’s interest and other expenses in respect of the LLC5 loan notes on two grounds, transfer pricing rules and non-deductible.
The case went to the First-tier Tribunal which found in Blackrock’s favour in 2020 for two issues: transfer pricing and allowable purpose.
HMRC appealed this decision to the Upper Tribunal, which sided with the revenue body in 2022.
Blackrock went to the Court of Appeal to appeal the decision of the Upper Tribunal and to re-make the decision of the First-tier Tribunal. The parties were at court last month for three days.
The Court of Appeal handed down a judgment on Thursday, disagreeing with the Upper Tribunal. The court has dismissed Blackrock’s appeal.
Commenting on the decision, a HMRC spokesperson said: “We welcome the Court of Appeal’s decision which confirms our position on the unallowable purpose rules that there should be no tax deductions for interest payments on intra-group loans in those circumstances. We take action against those who seek to avoid tax.”
While a BlackRock spokesperson commented: “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,” they added.