Podcast: How does the purpose of your borrowing impact tax deductibility?

If a company borrows to obtain a tax advantage, the unallowable purpose rule may deny a tax deduction for the interest. 

This is what happened in three cases (BlackRock, Kwik-Fit, and JTI) decided by the Court of Appeal in the second quarter of 2024, and in two of them, the loan at issue was used to finance the acquisition of a US target from a third party.

The cases don’t mean that tax deductions for interest on acquisition financing will always be denied; but deductibility will depend on the facts in each case. So, what can be learned?

Tax partners, Dominic Robertson and Charles Osborne, join Tanja Velling, co-host of our regular Tax News podcast, for a special episode to discuss risk mitigation, how an HMRC enquiry in this area might proceed and the potential impact on acquisition structures.