Decision in Eastern Power Networks PLC & others v HMRC (2025) handed down on the “ownership proportion” provisions in s.144, and on the application of the ‘main purpose’ test in s.146B CTA 2010
On 10 June 2025, the FTT handed down its decision in Eastern Power Networks PLC & others v HMRC. The appeal concerned c.£600m of losses claimed by way of consortium relief by various companies in the UK Power Networks group.
The appeal turned on the construction of certain provisions of the Corporation Tax Act 2010 (CTA 2010) that limit the amount of losses that can be claimed, in circumstances where more than one ‘link company’ had been inserted into the acquisition structure to enable the “ownership proportion” given by s.144 CTA 2010 to be inflated. This was intended to be achieved by engineering (i.e., on the Appellants’ construction of s.144 CTA 2010) that indirect entitlements through three wholly owned link companies would exceed 100%.
The FTT applied s.6 of the Interpretation Act 1978 and found (in HMRC’s favour) that ss.165, 166, and 167(2) CTA 2010 (expressly to be applied for this purpose by s.144(3)(b) and (c)) were to be construed as applying to the link companies collectively, with the effect that none of the link companies could be regarded as holding beneficial entitlements to assets and profits of UK Power Network Holdings Ltd available for distribution through the other link companies. Since the FTT found that it was not appropriate to construe the provisions so as to aggregate the link companies’ indirect entitlements to assets and profits, the lowest “ownership proportion” was 40% (not 74.64% as the Appellants had claimed). The FTT held that the “ownership proportion” could not exceed 100%.
The FTT also found in HMRC’s favour on the second issue which concerned the application of s.146B CTA 2010 (the meaning of which had previously been considered by the Court of Appeal in Eastern Power Networks Plc & Ors v Revenue And Customs [2021] EWCA Civ 283 (3 March 2021). The FTT applied the Court of Appeal’s decision in Delinian Ltd (Formerly Euromoney Institutional Investor PLC) v Commissioners for His Majesty's Revenue and Customs [2023] EWCA Civ 1281 (3 November 2023). It found that the Court of Appeal had not prescribed exactly how a tribunal is to ascertain whether arrangements form part of a scheme with a main purpose of tax avoidance; rather, its task was to apply the uncomplicated statutory words, by realistically identifying the scheme. On the facts, that scheme was the corporate structure created to enable the enhanced consortium relief claims to be made (and not the acquisition and running of the UK Power Networks business, as the Appellants had argued). The FTT also held that a ‘main purpose’ of that scheme was to obtain a tax advantage.
Marika Lemos KC, Aparajita Arya, and Josh Neaman appeared for HMRC (with David Ewart KC).
Back to News
