The Irish Vulture fund wins taxpayer money for UK Lehman assets

An Irish company is entitled to a £18m (€21m) UK tax refund for a windfall it received after buying assets from the insolvency of investment bank Lehman Brothers, a UK court has ruled.

The UK’s First Tier Tribunal has ruled that interest payments by Burlington Loan Management, a Dublin-based investment vehicle owned by New York hedge fund Davidson Kempner, are exempt from UK tax under the Ireland-UK double taxation treaty.

The decision could potentially free £1bn in taxes on Lehman-related transactions undertaken in the UK since the investment bank collapsed in September 2008, sparking the global financial crisis.

Burlington, which was formed in 2009, had acquired a £142m claim in management from Lehman which was paid in full by September 2016.

However, that claim brought in nearly £91million in interest when the debt was settled, 80 per cent of which was paid by Lehman’s stewards to Burlington, less £18million in withholding tax they said was owed to HM Revenue and Customs.

Burlington disputed the tax bill, claiming it was entitled to a full refund because it pays tax in Ireland – a position upheld by the UK Tax Court last week.

The case is potentially a milestone in a series of long-running tax battles related to the management of Lehman, which left billions of dollars in distressed assets when it failed.

In 2019, the UK Supreme Court ruled that Lehman’s administrators were ordered to pay a withholding tax on £5bn of statutory interest payments.

Hedge funds, however, continued their legal battle to hold on to that money, launching lawsuits based on treaties designed to prevent companies from being taxed twice in different jurisdictions.

Burlington’s assets totaled $10.7 billion at the end of December 2020, according to the company’s most recently filed financial statements. According to court records, 6 percent of his wealth is in Ireland.

The company, a Section 110 special purpose vehicle created solely to manage distressed assets stemming from the financial crisis, paid just over $3 million in Irish tax this year, despite paying amounts in the hundreds in the past. The Irish Vulture fund wins taxpayer money for UK Lehman assets

Fry Electronics Team

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