Jurisdiction(s):
United Kingdom

Tonkin v HMRC: UK FTT applies IHTA 1984 s 94(2)(a), no IHT on failed EBT where payments taxed as employment income; HMRC barred from double taxation

Published on: 14 July 2025

Published by a LexisNexis Private Client expert

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Tonkin v HMRC [2025] UKFTT 750 (TC)

What are the practical implications of this case?

The ruling offers helpful certainty: when a disguised remuneration arrangement collapses for income tax and NIC, an IHT charge under IHTA 1984, s 94 is not an inevitable consequence. The Tribunal found that s 94(2)(a) was in point, meaning no apportionment—and therefore no IHT liability—arose insofar as the transfer of value corresponded to sums brought into account in calculating employment income. This outcome trims HMRC’s ability to deploy IHT as a back-up assessment where remuneration schemes fail. The judgment also reflects judicial unease with attempts to impose overlapping liabilities where the relevant value has already borne PAYE in full. Overall, it underlines that the IHT code must operate consistently with the income tax regime, and that Parliament’s protections against double taxation must be upheld. In short, it brings welcome clarity and curbs automatic IHT follow-on...

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