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Tribunal allows taxpayer's appeal and confirms its holding in another company constituted a "structural asset"

02 November 2022. Published by Constantine Christofi, Senior Associate

In Guardian Assurance Ltd v HMRC [2022] UKFTT 234 (TC), the First-tier Tribunal (FTT) allowed the taxpayer's appeal against HMRC's decision that its majority stake in another insurance company was not a "structural asset" for the purposes of section 137, Finance Act 2012 (FA 2012).


Guardian Assurance Ltd (Guardian) is a principal life insurance company. In 1980, it acquired a 74% shareholding in Montreal Life Insurance Company (Montreal), a Canadian life insurance company. This shareholding increased to 99% of the ordinary shares in Montreal by 1983. In 1986, Guardian entered into a joint venture arrangement with Empire Life Financial Services Corporation (ELFC). ELFC owned two companies, one of which was called Empire Life Insurance Company (ELIC). Under their joint venture, Guardian and ELFC agreed to merge Montreal and ELIC to form a new holding company called Empire Life Financial Services Limited (ELFS). The shareholders agreement outlined that Guardian would hold its share in ELFS through a separate fund. 

On 30 August 2018, HMRC issued a closure notice in respect of an enquiry into Guardian's  tax affairs, which amended its tax returns for the periods ended 31 December 2013, 31 December 2014 and 31 December 2015 (the closure notice). 

The closure notice increased Guardian's profits subject to corporation tax by bringing into account dividend income of £2.7m and an increase in the value of a shareholding by £96.4m. In addition, by the consequential amendment made by HMRC (a) to the return for the period ended 31 December 2014, HMRC brought into charge additional dividend income of £3.4m and share value increases of £19m; and (b) the return for the period ended 31 December 2015, HMRC brought into account a loss on disposal of £63.9m and foreign exchange hedging gain of £17.8m. 

Guardian appealed the closure notice to the FTT. 

The only issue in the appeal was whether, during the relevant period, Guardian's shareholding in ELFS (the shareholding) was a “structural asset” and therefore, “long-term business fixed capital”, within the meaning of section 137, FA 2012.

FTT decision

The appeal was allowed.

Given the limited case law on the meaning of "structural asset" the FTT referred to other sources including the papers from the Committee Stage for Finance Bill 2007, in which a minister stated that structural assets are “assets which are held by an insurance company as part of its trading structure”. 

The FTT was not persuaded by HMRC's argument that the shareholding was "at risk" in the business and that any investment income should therefore be treated as trading income. Nor did it find HMRC's arguments that Guardian's policyholders benefitted more than its shareholders from the asset, helpful in determining whether the asset was structural. 

In the view of the FTT, Guardian's ability to appoint board members demonstrated control and influence over ELFS which suggested the shareholding was a "structural asset". The FTT also referred to the fact that the shareholding was in a business very similar to Guardian's own business and that Guardian had held the shareholding for a long period of time (almost 30 years). The FTT considered both of these factors to be of relevance and that they supported Guardian's argument that the shareholding constituted a structural asset. 


The FTT has confirmed that a “structural asset”, for the purpose of section 137, FA 2012, means an asset that is held as part of the relevant insurance company’s trading structure. The decision provides  a degree of certainty that such an asset will comprise fixed as opposed to circulating capital, although not all fixed capital assets will constitute “structural” assets. Interestingly, the FTT commented that an analysis of capital versus revenue expenditure  added an unnecessary layer of complexity which distracted from the focus on the actual wording of section 137. Helpfully, the FTT identified a number of factors which it considered important in determining whether an asset was "structural", such as the length of holding and the nature of the business. 

The decision can be viewed here