A structure used by the Blackrock Group is at court today as it seeks to overturn a decision that found in favour of the revenue body over UK transfer pricing.
Blackrock Holdco 5, LLC was a structure used by Blackrock when it acquired 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.
However, HM Revenue and Customs (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 revenue body contended that these intra-group loans would not have happened at arm’s length with an independent lender.
The case went to the First-tier Tribunal, which in 2020, the Tribunal found in Blackrock’s favour the two issues; transfer pricing and allowable purpose.
HMRC went on to appeal that decision to the Upper Tribunal, the parties were at trial in February 2022, and a judgement was handed down on 19 July, which sided with the revenue body.
Starting on Tuesday, the case is at the Court of Appeal, before Lord Justice Peter Jackson, Lord Justice Nugee and Lady Justice Falk.
Blackrock is appealing the decision of the Upper Tribunal and to re-make the decision of the First-tier Tribunal. The parties are expected to be at a hearing until Thursday 7 March.