Legal News

In this issue: Trusts Court of Protection UK taxes for Private Client Family businesses and ownership structures HMRC Manuals updates Tax avoidance, evasion and non-compliance Charity and philanthropy Contentious trusts and estates Pensions, insurance and tax efficient investments Scotland, Wales and Northern Ireland International Question of the week Additional Private Client updates this week Daily and weekly news alerts Lex Talk®Private Client: a Lexis®PSL community New and updated content Dates for your diary Trackers Latest Q& As Useful information Trusts UK government consults on transparency of land ownership involving trusts The Department for Levelling Up, Housing and Communities, the Department for Business and Trade, HM Treasury and HMRC have opened a consultation to improve clarity where trusts feature in land ownership structures. They seek targeted input on...

See Q& A: What issues arise out of the fact that the surviving spouse who is also the sole executor seeks to brings a pre-grant claim for financial provision under the Inheritance ( Provision for Family and Dependants) Act 1975? Who do they sue? Family provision claims under the Inheritance ( Provision for Family and Dependants) Act 1975 ( I( PFD) A 1975) are governed by CPR 57. Under CPR 57.16, proceedings must be started in accordance with CPR 8, subject to the modifications in sub-sections 3–5. Neither I( PFD) A 1975, CPR 8 nor CPR 57 specifies who must be named as defendants. In practice, the proper defendants are the deceased’s personal representatives ( PRs) together with all beneficiaries who have an interest in the estate. Accordingly, the claim is brought against the PRs and those...

Campbell v HMRC [2023] UKUT 265 ( TCC) What are the practical implications of this case? It is relatively unusual for the UT to return matters to the FTT with such trenchant comment. Here, the UT not only identified several errors of law, but also delivered robust criticism of the FTT’s methodology and conclusions. The censure extended to both the approach adopted and the conclusions drawn by the FTT. Of the four grounds advanced by Mr Campbell, the UT agreed with three, quashing those determinations and sending them back for a fresh determination by a differently composed FTT tribunal. Of note, the UT did not also send back the trading issue, even though it considered the FTT had misread an important authority. Should Mr Campbell eventually prevail on every ground, he would have disposed of four properties within six years, realising profits of circa...

Revenue and Customs Commissioners v E. On UK plc [2023] EWCA Civ 1383, [2023] All ER ( D) 34 ( Dec) What are the practical implications of this case? The judgment offers a clear review of the authorities that may bear upon the sole statutory issue raised here: whether the sum in dispute amounts to earnings ‘from’ employment. In that setting, the Court of Appeal elucidated the ratio in Tilley v Wales [1943] AC 386 and marked out the limits of the ‘replacement principle’ from Mairs v Haughey [1994] 1 AC 303. With those propositions settled, and taking the First- Tier Tribunal’s findings about the nature of the payment and the circumstances in which it was made, the statutory question admitted of a straightforward resolution. What was the background? The respondent sought to lower the expenses tied to running its defined benefit scheme. It put forward several...

For the time being, this ruling chiefly confirms that the reach of the TOAA code is far narrower than HMRC asserted, and should, with luck, deliver long-awaited certainty for taxpayers and their advisers in comparable scenarios going forward, as well as substantially curtail the use of the TOAA provisions in like circumstances, both in current matters and future disputes. As Lady Rose observed at the outset of her judgment, the TOAA regime ranks among the most bewilderingly intricate parts of UK tax law—a striking, if somewhat questionable, accolade given the usual complexity of UK taxation. It is little wonder that the appeals in this matter produced a different result at each stage of the litigation. Further illustrating the tax law’s complex nature, more than ten years have passed before the Supreme Court finally resolved the Fisher dispute at long last, in the end. It was...

Harber v HMRC [2023] UKFTT 1007 ( TC) The taxpayer did not inform HMRC of a chargeable gain arising on the sale of a UK residential property. HMRC imposed a ‘failure to notify’ penalty, which the taxpayer challenged, claiming a reasonable excuse on two bases: ignorance of the law, and her mental health She submitted a written note referring to nine FTT authorities said to underpin both arguments, reportedly supplied by ‘a friend in a solicitor’s office’. HMRC’s advocate and the FTT attempted to locate those cited decisions on the FTT site and other standard legal resources but were unable to find them—they appeared not to exist. The FTT determined that the supposed authorities were not authentic tribunal decisions and had in fact been created by an artificial intelligence tool. The case summaries the taxpayer relied on were described as...

SKAT v Solo Capital Partners and others The Supreme Court has affirmed the Court of Appeal’s conclusion that Dicey rule 3 (the revenue rule) does not apply in this instance, as the Danish tax authority seeks to recover sums obtained by fraud rather than to enforce unpaid Danish tax or reclaim Danish tax. Consequently, SKAT’s claims against Solo Capital Partners and others can proceed to a trial in an English court. In addition to a summary of the ruling, this News Analysis also includes commentary from: Hugh Gunson, Partner, Charles Russell Speechlys LLP Jonathan Schwarz, Temple Tax Chambers ( Tax Counsel to SKAT) Background to the Appeal Skatteforvaltningen (‘ SKAT’), the Danish Customs and Tax Administration, has brought claims in England and Wales against a number of parties, including the appellants. SKAT alleges that these parties submitted fraudulent applications for tax refunds to which they were never...

What are the practical implications of this case? In Commissioners for His Majesty’s Revenue and Customs v Vermilion Holdings Ltd [2023] UKSC 37, the ruling carries notable, practical consequences for employers aiming to grant shares or share options to company officers or employees. Unless an officer or employee can rely on one of the exceptions in ITEPA 2003, s 471(3), any option issued while they hold office or employment will be classified as an employment-related security and, accordingly, taxed as employment-related income. The purpose behind offering the security option to the relevant officer or employee is immaterial. There is, however, an open question as to whether ITEPA 2003, s 471(3) will remain the central provision where options are granted to former employees or individuals yet to begin employment with the company. It appears, on balance, more likely that in those...

Estate of Archibald and another v Stewart and another [2023] EWHC 2515 ( Ch) What are the practical implications of this case? A maintenance-centred claim under the I( PFD) A 1975—and likely a spouse’s claim too—is personal to the claimant and ends on their death. Exercise caution when advising elderly or seriously ill clients who may not survive to trial. A son- or daughter-in-law invoking I( PFD) A 1975, s 1(1)(d) as being treated as a child of the family must show more than ordinary affection, kindness, and hospitality from a parent-in-law. The court will examine whether the parent-in-law effectively took the claimant under their wing or accepted a distinctive parental responsibility towards them. There must be strong reasons to advance a claim long out of time. Dissatisfaction with discretionary trustees’ decisions is...

HMRC v Vermilion Holdings Ltd [2023] UKSC 37 Background This appeal revolved around the construction of ITEPA 2003, s 471. That provision identifies when an option to obtain securities (including company shares) is given ‘by reason of employment’ and so chargeable to income tax rather than capital gains tax. In 2006, Vermilion Holdings Ltd ( Vermilion) granted Quest Advantage Ltd ( Quest) an option to acquire shares in Vermilion (the 2006 Option). By late 2006, Vermilion’s performance had deteriorated. As part of a rescue funding arrangement, Vermilion and Quest agreed to vary the 2006 Option. In July 2007, they executed a fresh option agreement (the 2007 Option), under which Quest subscribed for a new class of Vermilion shares and the 2006 Option lapsed. In 2016, Quest assigned the 2007 Option to Mr Noble. Quest sought HMRC’s confirmation that the assignment fell within capital gains tax. HMRC...

The ‘qualifying lease’ The term ‘qualifying lease’ was introduced by BSA 2022, s 119. Its importance lies in the fact that BSA 2022, Sch 8 brings in a series of restrictions on tenants’ liability to pay service charge. Put plainly (while the Act should always be consulted for its exact wording), these restrictions cover scenarios where the landlord or an associate is responsible for the relevant defect, where the landlord meets the ‘contribution condition’ (in essence, possesses a certain level of worth in relation to the number of properties owned), where the lease is under a particular value, where the defect relates to cladding, and so forth. Other than the first of these—defects for which a landlord or associate is responsible—each restriction applies solely to qualifying leases. Accordingly, holding a qualifying lease can be a valuable benefit. When, then, does a lease qualify? The answer is set out in...

Z NHS Foundation Trust and another v Patricia and others [2023] EWCOP 41 (09 May 2023); In the matter of Patricia [2023] EWCOP 42 (15 May 2023) What are the practical implications of this case? Practitioners dealing with matters where protected parties have anorexia nervosa or other eating disorders will find these judgments helpful guidance when addressing capacity to make decisions about medical treatment. The determining factor for the judge was that, although the protected party stated a clear desire to live, the medical evidence and her behaviour during the proceedings showed that her intense fear of gaining weight—a feature of her disorder—was so powerful that it overrode her ability to take life‑preserving steps in accordance with medical advice. This is also an illustration of the unusual situation in which a protected party has capacity to conduct the litigation but lacks capacity to make the...

Mullens v HMRC [2023] UKUT 244 ( TCC) The taxpayer, a practising solicitor, acted as an adviser to the Ecclestone family interests. Over a number of years, he received six payments amounting in total to £40m. He excluded these sums from his self-assessment tax returns, maintaining that they constituted gifts. HMRC issued discovery assessments in respect of payments one to five, respectively, relying on section 29(4) of the Taxes Management Act 1970 ( TMA 1970) on the basis that there was a loss of tax attributable to the taxpayer’s careless or deliberate conduct. In relation to payment 6, HMRC issued an enquiry closure notice in that enquiry. The assessment dealing with payment five was made within the normal relevant statutory time limits, whereas those for payments 1–4 instead depended upon the extended time limits provided by TMA 1970, s 36. HMRC also issued penalty...

Alpha Republic Ltd v HMRC [2023] UKFTT 750 ( TC) The substantive appeal in this matter centred on HMRC assigning a scheme reference number under the disclosure of tax avoidance scheme ( DOTAS) provisions in respect of arrangements promoted by the company. The company had likewise initiated judicial review proceedings to challenge HMRC’s decision to publish its name and related particulars, though those proceedings were withdrawn shortly before the scheduled hearing. The company then applied for a direction compelling HMRC to serve a fresh statement of case on a number of stated grounds. It contended that the dispute stemmed from legislation described as ‘penal’ and ‘contradictory to fundamental principles of English law’, and therefore should be construed restrictively, with the tribunal, in particular, ensuring that HMRC at all times observed rigorous compliance with the Tribunal......

An NHS Trust v ST (by her litigation friend, the Official Solicitor) and others [2023] EWCOP 40 What are the practical implications of this case? It is crucial to stress that this ruling turned on its particular facts, and it should not be taken (as the Official Solicitor for ST plainly feared it might be) to amount to the crude rule: ‘if a patient accepts what the doctor says—capacity; if a patient does not—no capacity’. Rather, Mrs Justice Roberts’ remarks highlight the enduring significance of belief within the framework of the functional test set out in the Mental Capacity Act 2005 ( MCA 2005), a point of broader relevance; see further here for more on how the MCA 2005’s language sits with clinical and social work realities. Roberts J was plainly right to note that a formal diagnosis is not required before the court (or indeed...

Wilkinson and others v HMRC [2023] UKFTT 695 ( TC). Mr and Mrs Wilkinson jointly held around 58% of the ordinary share capital in P Ltd. A sale was agreed whereby the BCA group would acquire P Ltd via an acquisition vehicle, TF1 Ltd, for £130m (the transaction), with the price satisfied through a mix of cash and loan notes issued by TF1 Ltd (the exchange). In the days immediately before the deal, they transferred a substantial number of P Ltd ordinary shares to their daughters. On completion, shareholders other than the daughters received cash and loan notes; the daughters instead took a different class of loan notes together with B ordinary shares in TF1 Ltd, and no cash. The daughters were also appointed as non-executive (and unpaid) directors of a company that was a 100% subsidiary of P Ltd. These steps were...

Spencer v Spencer [2023] EWHC 2050 ( Ch) On 9 August 2023, Rajah J handed down judgment in Spencer v Spencer [2023] EWHC 2050 ( Ch), a farming proprietary estoppel dispute. Stephen Jourdan KC and Caroline Shea KC represented the claimant and defendants, respectively. Stephen was leading Christopher Jones, instructed by Tim Russ of Roythornes, while Caroline led Sarah Haren KC, instructed by Russell Reeves of Thrings. The claimant, Michael Spencer, asserted that his late father had assured him he would succeed to the freehold land making up the farm on his father’s death—about 405 acres—and that he had acted in reliance on those assurances so that it would be inequitable for his father to depart from them. Up until shortly before he died, his father’s wills had left the land to Michael. However, a new will executed shortly before death left the land to trustees on a...

David Mc Clean and others v Andrew Thornhill KC [2023] EWCA Civ 466 The appellants belonged to limited liability partnerships ( LLPs) established specifically to obtain and exploit distribution rights in films. Prospective investors were pitched the Scheme by the promoter, as presented on the footing that, as members of an LLP, they would qualify for tax relief on trading losses the LLP was expected to incur, which they could set off against their own personal income or capital gains, thereby reducing their tax liabilities. The Scheme’s promoter retained Mr Thornhill to produce a series of opinions addressing the tax consequences of the arrangements. HMRC disputed the supposed purported fiscal advantages of investing in or participating in the Scheme, contending the LLPs were not conducting trade on a commercial footing with an intention to make a profit. In 2017 the investors concluded a...

Dorey v Ashton [2023] GCA008. The facts The appellants were three of the four adult offspring of Sir Graham Dorey, a former Bailiff of Guernsey. In 2004, the respondent advocate prepared Wills of personalty and of realty for Sir Graham Dorey. Although he was known to have dementia, a consultant psychiatrist had concluded that he nevertheless retained testamentary capacity at the relevant time. The claimants disputed the circumstances in which those Wills were executed. Absent the Wills, the children would have taken 100% of Sir Graham’s estate on intestacy, because a pre-nuptial agreement between Sir Graham and his second wife, their stepmother, contained a disclaimer of any claim to the estate while expressly allowing Wills to be made. Under the Wills, a share of Sir Graham’s estate was directed to his second wife under those instruments. Sir Graham died in 2015. All four...

Mark Mitchell and Paul Bell v HMRC [2023] EWCA Civ 261 The case arose after HMRC assessed two companies for input tax because they were unable to show they had ever received the particular supplies on which the input tax had been claimed. The companies then went into liquidation, and HMRC issued personal liability notices of roughly £6m to the two directors, Paul Bell ( Bell) and Mark Mitchell ( Mitchell). A statutory review upheld HMRC’s assessment, and the First-tier Tax Tribunal ( FTT) subsequently directed that the two appeals lodged by Mitchell and Bell should be heard together. A complication was that evidence relied upon by HMRC had been provided by Mr Mitchell and was obtained by HMRC during an enquiry into Mr Mitchell’s own tax affairs. Contending that the documents were not relevant to the dispute, Mr Mitchell declined to share that...