In Muller UK and Ireland Group LLP & Ors v HMRC [2026] EWCA Civ 248, the Court of Appeal (CoA) found that the related party restriction on claiming deductions for intangible assets applied to the Limited Liability Partnership (LLP) and its corporate members. As a result, the taxpayer's amortisation deductions were denied tax relief.
On 1 July 2013, three corporate members of the Muller multinational group transferred their respective trades and assets to Muller UK and Ireland Group LLP in exchange for membership units in the LLP.
- The assets included brands, licences, software and goodwill, which fell within the Intangible assets regime for Corporation Tax purposes.
- The LLP recorded the assets at their fair value in its accounts and amortised them over five years on a straight-line basis.
- The amortisation was then included as a deduction in each corporate member's tax return for the years 2013 to 2018.
- On various dates between June 2015 and December 2018, HMRC challenged this treatment by opening enquiries.
- In January 2019, HMRC Closed the enquiries and denied the amortisation deductions.
- The taxpayers appealed against HMRC's conclusion, firstly to the First Tier Tribunal (FTT), and subsequently to the Upper Tribunal (UT).
- The FTT found in favour of HMRC and Dismissed the appeal.
- The UT agreed with the FTT and Dismissed the appeal.
- The taxpayer appealed to the Court of Appeal (CoA).
What was the issue?
- Under UK tax law, when an LLP has corporate members, its profits are calculated by deeming the LLP to be a notional company.
- The intangible assets regime allows companies to claim a deduction on acquiring certain assets, unless the parties involved are 'related parties'.
- A 'related party' for these purposes does not include a partnership.
- In this case, if the LLP had been a company, the related party restriction would have applied.
- The issue then was whether the requirement to deem the LLP as a notional company includes considering its ownership characteristics.
- The taxpayer contended that the legislation only relates to computing the profits on a particular basis. There is no express direction to deem the partnership to be a company.
- They argued that the only reason for the deeming rule is that computing trading profits for Corporation Tax differs in some ways from computing them for Income Tax.
The CoA found that:
- The FTT and UT had ruled correctly.
- The deeming provision requires the ownership and characteristics of the LLP to be considered, at least for the purpose of determining whether the related party restriction applied.
- The CoA considered that computing the notional profits of the notional company could not be ascertained in a vacuum, and agreed with the UT's reasoning. The calculation was about more than the arithmetic process. Rules on whether the related party exception applied were just as much a part of the calculation as subtracting the amortised amount was.
- The taxpayers' position was also inconsistent. They were relying on the deeming provision to obtain amortisation deductions, but could only do so if the relationship between the LLP and its corporate members was disregarded. This would not have been possible if the LLP had been a company.
- The CoA determined that Parliament's intention was for the real-world nature and circumstances of the LLP's trade to be replicated as far as possible in making the notional computation.
The appeal was dismissed.
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External link
Muller UK and Ireland Group LLP & Ors v HMRC [2026] EWCA Civ 248