HMRC v Burlington Loan Management: Court of Appeal clarifies "taking advantage" under UK-Ireland double tax treaty

The Court of Appeal has dismissed HMRC's appeal in The Commissioners for HMRC v Burlington Loan Management DAC, confirming that an Irish-resident investment company did not fall foul of the anti-abuse provisions of the UK-Ireland double taxation treaty when it acquired a debt claim in the Lehman Brothers International (Europe) administration and subsequently reclaimed UK withholding tax on £90.8 million of post-administration interest.

The central question was whether Burlington Loan Management DAC ("BLM") had, as one of its main purposes in acquiring the claim by assignment from SAAD Investments Company Ltd ("SICL"), sought to "take advantage of" Article 12(1) of the UK-Ireland Treaty within the meaning of Article 12(5) — the treaty's anti-abuse provision. HMRC argued that because the transaction would have been economically unviable for BLM without the Article 12(1) exemption, obtaining that benefit must have been a main purpose of the assignment.

Snowden LJ, giving the lead judgement, rejected this reasoning on a point of construction that significantly narrows the reach of Article 12(5). Drawing on the recent Court of Appeal decision in Vietjet Aviation JSC v FW Aviation (Holdings) Limited [2025] EWCA Civ 783 and the 2014 OECD Commentary on the Model Tax Convention, he held that "to take advantage of" Article 12 cannot be treated as synonymous with merely "obtaining the benefit of" that article. To do so would render the treaty self-defeating: a provision designed to encourage cross-border capital movement cannot be construed as an abuse provision that frustrates the very relief it confers.

Instead, the phrase requires that the benefit be obtained in a manner contrary to the object and purpose of the treaty. As Paragraph 9.5 of the OECD Commentary makes clear, the relevant question is whether obtaining a more favourable tax position was contrary to the purpose of the relevant provisions — not merely whether the tax benefit was material to the economics of the transaction.

Applying that standard, BLM's position was unimpeachable. It was a long-established Irish-resident entity that had been acquiring LBIE claims since 2011. It dealt with SICL entirely at arm's length through a broker, with no element of collusion or artificiality. Far from abusing the treaty, BLM was doing precisely what Article 12(1) was designed to encourage: an Irish resident deploying capital into a UK-source income stream without fear of double taxation.

Snowden LJ also firmly disposed of BLM's respondent's notice, which sought to confine Article 12(5) to "artificial" transactions. The 1998 Protocol amending the UK-Ireland Treaty had deliberately removed the original requirement that an assignment not be "for bona fide commercial reasons." Article 12(5) is therefore capable of applying to genuine commercial transactions — though the presence or absence of artificiality remains a highly material consideration in assessing purpose.

Falk LJ added observations on the relationship between the case and earlier authority, particularly the tension between Fisher v HMRC [2021] EWCA Civ 1438 and the obiter dicta of Cross J in IRC v Kleinwort Benson [1969] 2 Ch 221. She declined to resolve that tension but emphasised that where a tax advantage is specifically conferred by the relevant legislative or treaty code — as Article 12(1) plainly confers an exemption on Irish residents — it cannot have been intended that invoking that advantage should automatically engage an anti-abuse rule. Something more is required.

The judgement will be of significance in the secondary debt market, where the tax attributes of potential purchasers routinely inform pricing. The Court confirmed that a seller marketing a claim to the highest bidder, even with knowledge that the purchaser's ability to pay a premium derives from a treaty exemption, does not thereby acquire a purpose of taking advantage of that treaty.