Upper Tribunal Decision on whether an LLP was “trading or carrying on a business with a view to profit”.

Revenue and Customs v GCH Corporation Limited & Ors [2026] UKUT 00219 (TCC)

Background

The taxpayers were a limited company, an LLP and three settlements (the Trusts) created by Mr Gregory Hutchings, for the benefit of his family. The taxpayers participated in a tax mitigation scheme. The scheme was designed to reduce or eliminate tax on capital gains accruing on the redemption of certain loan notes, which the company and the Trusts acquired in exchange for shares which they sold as part of the takeover of another company in which they had invested.

The company and each of the Trusts were members of the LLP.  The key steps in the scheme involved the contribution of the loan notes by the company and the Trusts to the LLP and the subsequent redemption of the loan notes by the LLP after it had been put into liquidation.

FTT Decision

The FTT allowed the taxpayers’ appeal on the basis that, at the time of the transfer of the loan notes to the LLP, the LLP was to be treated as a partnership for the purpose of tax on capital gains because the LLP was, at that time, carrying on a business with a view to profit (section 59A(1) Taxation of Chargeable Gains Act 1992 (TCGA)).  The FTT construed the word “business” as including the business of investment; and carried out an evaluative exercise of the facts on the evidence in deciding that the LLP was in business with a view to profit. Accordingly, the transfers of the loan notes were regarded as capital contributions rather than disposals, and no CGT was due.

UT Decision

HMRC appealed against the FTT’s decision and the Upper Tribunal (Mr Justice Edwin Johnson and Judge Ashley Greenbank) has dismissed HMRC’s appeal, deciding that the FTT was right in its conclusion that “business” in section 59A(1) should be given its ordinary commercial meaning and should not exclude investment business (at [134]). The UT dismissed HMRC’s appeal against the FTT’s evaluative conclusion, noting the high hurdle to successfully appealing such evaluative conclusions at [152].

Other Issues 

The UT considered several other issues. These were as follows:

1. Whether the taxpayers required permission to rely on alternative reasons to uphold the FTT’s decision, or whether their Respondents’ Notice was sufficient. The UT held that separate permission to appeal was not required, and the decision offers a summary of the principles of when permission is required at [62].
2. Whether there had been a valid discovery by the HMRC officer, or whether that officer had merely adopted the discovery of another officer of HMRC without having made a discovery of any kind. The UT held that the FTT was right to accept the evidence of the HMRC officer in question and there was no error of law in their conclusion that there had been a valid discovery under section 29(1) Taxes Management Act 1970.
3. Whether the LLP was trading, and unsurprisingly, held at [185], that the concept of “trade” is narrower than that of “business”.

Sarah Black and Susanna Mockford acted for HMRC before the UT. The decision can be viewed here.