The facts in AH Field (Holdings) Ltd v HMRC [2012] UKFTT 104 (TC) are relatively straightforward. The taxpayer company borrowed £2m from Barclays and used the funds to make a dividend payment up its corporate chain. The top holding company in the chain used the dividend received to subscribe for a zero coupon note (the Note) issued by the taxpayer which in turn used the subscription proceeds to repay the external loan. After 363 days the taxpayer entered into a new loan from Barclays allowing it to redeem the Note. This structure was repeated for a number of years. The question for the Tribunal was whether the deduction claimed for the difference between the Note issue price and the redemption proceeds was allowable.
The taxpayer argued that it had a number of commercial...