In brief:
- The Court of Appeal delivers a timely reminder: using a relief Parliament deliberately enacted is not abusive.
- HMRC's increasingly aggressive clearance process is causing real problems for live transactions.
- Are taxpayers being pushed towards implementing without clearance - and litigating later?
The tax clearance procedure is expressly designed to give taxpayers certainty before they act. Increasingly, however, that certainty feels harder, and slower, to obtain.
Historically, allowing 60 days for clearances was cautious but workable. That timetable accommodated the 30-day statutory response period, plus one sensible round of HMRC questions. Applications were assessed in the transaction context, with prudent tax planning distinguished from avoidance.
Since the Autumn Budget 2025 amended the share-exchange-relief regime, some HMRC officers seem empowered to challenge any step that produces a tax-neutral or favourable result, even where there is a clear commercial rationale. This leads to repeated rounds of questions: some irrelevant or repetitive, all with the practical effect of running down the clock on a live deal and forcing taxpayers to abandon even the most vanilla structures or take the risk of proceeding without clearance.
Against this backdrop, the Court of Appeal’s (CoA) decision in Burlington Loan Management DAC is particularly timely and conveys a clear message to taxpayers: using a tax relief that Parliament has deliberately put into law is not, by itself, abusive.
In Burlington, a debt claim was assigned to an Irish company, which sought to rely on the UK-Ireland tax treaty to remove UK withholding tax on interest payments. HMRC argued that, because the assignment secured that treaty benefit, the anti-abuse rule disapplies the benefit.
The CoA disagreed, stating that:
“where the tax advantage in question is specifically conferred by legislation, then it cannot have been intended that it should inevitably be denied by a ‘main purpose’ rule if it forms part of the economics of a transaction. Something more is needed.”
Burlington does not reinvent the law, instead restating a decades-old principle: taxpayers are entitled to order their affairs using law Parliament has enacted and the fact a transaction has been structured efficiently does not make it abusive.
In a clearance context, HMRC can, of course, ask questions driven by genuine concerns that a transaction is designed to secure a relief counter to Parliamentary intention, however, a tax-efficient result should not be treated as a proxy for avoidance.
Focussing on results, not intentions, is a recipe for disaster - the clearance process works because it encourages transparency from taxpayers in inviting HMRC to raise real concerns. If that process becomes slow, unpredictable or overly defensive, taxpayers are pushed towards implementing without clearance and arguing later in an infinitely more costly way.