August 14, 2026
The Upper Tribunal held that “business” in section 59A(1) TCGA 1992 has its ordinary commercial meaning and can include an investment business—even where the LLP was established primarily to facilitate a tax-mitigation arrangement.
The respondents had held shares in a public limited company. Following a takeover, those shares were exchanged for loan notes, with the effect that the accrued capital gains were deferred.
The loan notes were subsequently transferred to an LLP.
The structure relied upon the interaction between two parts of section 59A:
· Under section 59A(1), where an LLP carries on a trade or business with a view to profit, its assets and dealings are treated for capital gains tax purposes as those of its members acting in partnership.
· Under section 59A(4), that treatment ceases when a liquidator is appointed, after which the LLP is treated as a company.
The arrangement was intended to take advantage of the transition between those two treatments and eliminate gains that had accrued before the loan notes were contributed to the LLP.
The LLP entered members’ voluntary liquidation approximately ten months after it had been incorporated.
During its existence, however, it acquired shareholdings in five listed companies. It sold some of those shares at a profit and received dividend income. Although it did not have a bank account in its own name, the First-tier Tribunal found that it had been established not only to facilitate the tax arrangement but also as a vehicle through which an investment business would be conducted.
The essential issue was whether the LLP had carried on a “trade or business with a view to profit” within section 59A(1).
HMRC did not accept that the LLP’s investment activities were sufficient.
Its position was that “business” should be interpreted more narrowly and should not extend to what it characterised as passive investment activity. HMRC also relied upon the LLP’s role within the wider tax-mitigation structure.
The First-tier Tribunal rejected HMRC’s argument and concluded that the LLP had been carrying on a business with a view to profit.
HMRC appealed to the Upper Tribunal.
The Upper Tribunal began with the statutory context.
The purpose of section 59A(1) was to align the capital gains tax treatment of LLPs with the treatment of ordinary partnerships. It was not itself an anti-avoidance provision.
Against that background, there was no proper basis for interpreting “business” as though it meant only a trade.
Parliament had used the expression “trade or business”. The inclusion of both terms indicated that “business” had a wider meaning than “trade”.
That conclusion was also consistent with the partnership legislation, under which “business” is defined broadly enough to encompass a range of commercial activities.
The Upper Tribunal therefore held that investment activity could amount to a business where it was undertaken as a commercial activity with a genuine profit-seeking purpose.
HMRC relied upon Rashid v Garcia, in which “business” had been given a narrower meaning in the context of National Insurance legislation.
The Upper Tribunal agreed with the First-tier Tribunal that Rashid was distinguishable.
The meaning adopted in that case reflected the particular statutory context in which the word was being used. It did not establish a general rule that investment activity can never constitute a business.
The Upper Tribunal instead applied the broader approach found in authorities including Ramsay v HMRC and American Leaf Blending Co v Director General of Inland Revenue.
Those authorities support the proposition that the gainful use of assets by an entity established for profit-making may amount to the carrying on of a business, even where the activity is intermittent.
The question remains one of fact and degree. But investment activity does not cease to be a business merely because it does not amount to a trade.
The decision is also important because the LLP’s principal role in the arrangements was tax-related.
The First-tier Tribunal had found that the LLP was established primarily for the tax-mitigation structure. Nevertheless, it also found that the LLP was intended to conduct an investment business.
Those conclusions were not mutually exclusive.
For section 59A(1), the requirement that the business be carried on “with a view to profit” involved a subjective inquiry into whether there was a genuine profit-seeking purpose.
Profit did not have to be the LLP’s sole purpose. Nor did it have to be its dominant purpose.
The fact that securing a tax advantage was a principal objective did not automatically negate the existence of a separate and genuine intention to earn investment profits.
On the facts, the LLP had acquired investments, received dividends and sold investments at a profit. Those activities were consistent with the stated commercial purpose for which it had been established.
Its participation in a tax-planning arrangement did not prevent those activities from constituting a business.
Whether a person or entity is carrying on a business is generally an evaluative question.
The First-tier Tribunal had heard the evidence and assessed the nature, purpose and extent of the LLP’s activities. It had concluded that the LLP was carrying on an investment business with a view to profit.
The Upper Tribunal emphasised that an appellate tribunal should not interfere with that type of evaluative conclusion merely because it might have reached a different view.
Intervention would be justified only where the First-tier Tribunal had applied the wrong legal test, reached an irrational conclusion or otherwise made an error of law.
No such error had been established.
HMRC’s appeal was therefore dismissed.
There is no single definition that can be applied mechanically throughout the tax code.
A narrow interpretation adopted in one statutory context—such as National Insurance—cannot necessarily be transferred to a capital gains tax provision enacted for a different purpose.
The starting point must always be the language, structure and purpose of the particular provision under consideration.
The decision confirms that “business” is not necessarily confined to trading activity.
An entity that acquires, manages and disposes of investments for profit may be carrying on a business, even though its activities do not amount to a trade.
That may be relevant beyond LLPs wherever tax legislation distinguishes between a trade and a wider business activity.
The case does not establish that the mere ownership of an investment automatically constitutes a business.
The LLP had acquired shares in several listed companies, received dividends and realised profits on disposals. Those transactions were consistent with its stated investment purpose.
Contemporaneous records showing investment decisions, commercial objectives, transactions and profit expectations will therefore remain important.
A structure may have a strong—or even predominant—tax objective while also involving genuine commercial activity.
The existence of a tax motive does not permit the statutory test to be rewritten. The question remains whether the conditions enacted by Parliament are satisfied.
Where the legislation requires a business to be conducted with a view to profit, it does not necessarily require profit to be the only or dominant motive.
The judgment should not be interpreted as a blanket endorsement of LLP-based capital gains tax planning.
It determined the meaning and application of section 59A(1) on the particular facts found by the First-tier Tribunal.
Other statutory provisions, anti-avoidance rules or factual circumstances may produce a different result.
The central point is narrower: section 59A(1) did not justify excluding an investment business simply because the LLP was also being used within a tax-mitigation structure.
GCH Corp is a useful reminder that tax cases must be decided by applying the legislation Parliament enacted—not by starting from the proposition that a tax-motivated arrangement should fail and then narrowing the statutory language to achieve that result.
For section 59A(1), “business” has a broad, ordinary commercial meaning. It can include investment activity. A genuine view to profit need not be the sole or dominant purpose, and participation in a tax-mitigation arrangement does not necessarily deprive an entity’s commercial activities of their business character.
The decision does not remove the need for careful factual analysis. It does, however, reinforce an important principle: A tax purpose and a business purpose can coexist. The presence of one does not automatically negate the other.
