Foundation Partners v HMRC

In Foundation Partners v HMRC [2022] UKUT 167 (TCC) (28 June 2022) the Upper Tribunal (UT) dismissed the general partnership’s appeal against the decision of the FTT that its activities as carried out in 2008/09 did not constitute a trade.

Foundation Partners was a general partnership established through an arrangement set up by Future Capital Partners to form a vehicle for a property development in Montenegro. Losses of over £36m were recorded in the partnership tax return for 2008/09 precipitated on an accounting write down of stock in the partnership.

HMRC issued a closure notice denying the entirety of this partnership trading loss. The FTT dismissed the partnership’s appeal finding that it was not trading. The artificiality and lack of commerciality in the contracts entered into by Foundation showed that it did not have a ‘commercial character’ such that no reasonable trader would enter into them. The FTT...