Jurisdiction(s):
United Kingdom

Good v HMRC: Court of Appeal (England and Wales) holds taxpayer ‘entitled to’ MAPs despite assignment and payment direction to lender; taxable as film exploitation income under ITTOIA 2005 s611.

Published on: 14 February 2023

Published by a LexisNexis Tax expert

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Article summary

Thomas William Good v HMRC [2023] EWCA Civ 114

The taxpayer took part in a tax avoidance arrangement. Using a mixture of his own funds and borrowed capital from a lender, he acquired film distribution rights and, under a ‘distribution agreement’, assigned them in exchange for a continuing share of the films’ profits together with minimum annual payments (MAPs) expressly set to enable him to service his loan obligations and liabilities. As security, he transferred the benefit of, and granted a charge over, the MAPs to the lender. The MAPs were to be paid directly to the lender, to be applied to interest and repayment of the borrowing as they fell due each period. It was envisaged that the arrangement would generate a tax loss for sideways relief (although it was ultimately accepted this was unavailable because he was not carrying on a trade) and that interest on the loan would be deductible. The sole question before the Court of Appeal was whether he was ‘entitled to’ the MAPs and whether they constituted income ‘from’ the non-trade business of exploiting films, such that he was accordingly chargeable to income tax on them under section 611 of the Income Tax (Trading...

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