Assessee is Muller UK and Ireland Group LLP and its corporate partners
Muller UK and Ireland Group LLP, a limited liability partnership, acquired intangible assets from its own corporate partners and claimed amortisation deductions in the hands of those corporate partners based on their share of LLP income/loss. The intangible asset regime ordinarily disallows amortisation deductions on assets acquired from related parties. The question was whether those related-party restrictions apply when computing a corporate partner's share of LLP profits, given that the relevant "deeming provisions" were silent on the point.
Assessee's Contentions - The deeming provisions that apply corporate income tax rules to partnerships are silent on whether related-party rules apply in the context of a corporate partner's share of LLP income. That silence should be read as excluding the related-party restrictions, the corporate partners should be entitled to amortisation deductions on the intangibles acquired by the LLP.
Revenue's Contentions - The related-party rules must be applied when determining a corporate partner's share of LLP profits. The purpose of the deeming provisions is to preserve the same tax treatment as if the LLP were itself a corporation which would be denied the amortisation deduction under the related-party rules.
Court's Judgment - The Court of Appeal upheld the First-tier and Upper Tribunal decisions. Although the deeming provisions are silent on the point, it was appropriate on the facts to apply the related-party restrictions. The corporate partners were not entitled to amortisation deductions on the intangibles acquired from themselves via the LLP.
The Court of Appeal upheld the denial of amortisation deductions. It found that despite the deeming provisions being silent on whether related-party rules apply in the LLP context, applying those rules was appropriate on the facts. Corporate partners cannot claim amortisation deductions on intangible assets contributed to an LLP and then effectively reacquired by the LLP from themselves.
