Legal News

By overturning the General Court and concluding that the US technology giant owed Ireland over US$14.5bn in back taxes, the ECJ, noted by experts at a London conference of the International Fiscal Association, effectively departed from the reasoning in its 2022 decision involving the carmaker Fiat. In that case, it limited itself to interpreting Luxembourg’s transfer pricing law as it applied to Fiat and other companies. In Apple, by contrast, tax specialists criticised the ECJ for turning to the Organisation for Economic Co-operation and Development ( OECD) arm’s-length principle, which was not in Irish law for the years at issue. The court accepted the European Commission’s premise that the Irish government had ‘misapplied’ Irish tax law in 1991 and 2007 rulings that granted Apple significant tax advantages. The arm’s-length standard has been the guiding principle in the OECD’s transfer pricing...

Mc Cabe v HMRC [2024] UKUT 280 ( TCC) The appellant, M, was chief executive of a property development and investment group. On 4 April 2006 he relocated to Belgium and, over a period of the next seven years, he leased or purchased both residential and office premises within Brussels and established a Belgian personal service company to supply consultancy services to group entities. He remained married and continued to spend regular and substantial periods with his wife, who did not relocate to Belgium (and she retained legal title to the UK family home). M moved to Belgium to expand the group’s European business operations but also as part of tax planning specifically designed to ensure he would not incur liability to CGT on a share disposal by staying non- UK resident for five whole tax years and thereby...

Muller UK and Ireland Group LLP and others v HMRC [2024] UKUT 273 ( TCC) The appellants were three Muller Group entities tasked with producing, marketing and distributing dairy products in the UK and Ireland. In 2013, they transferred their individual trades and assets—covering intellectual property and goodwill—to Muller UK and Ireland Group LLP, receiving membership units in the LLP. The central question was whether CTA 2009, s 1259—under which the profits of a partnership, where any partner is within the UK corporation tax charge as a company, are computed as though a UK-resident notional company carried on the trade—draws in the intangible assets regime in CTA 2009, Pt 8. The dispute focused on whether that mechanism effectively incorporated Part 8 for these purposes, given the companies were within the corporation tax charge. Significantly, Part 8 contains an exception limiting...

Various pension funds v Netherlands tax authorities Case C-639/22 to Case C-644-22 The proceedings involved multiple Dutch pension schemes. Each had procured asset management services and contended that those supplies qualified for the exemption for ‘special investment funds’ ( SIFs) under Article 135(1)(g) of the EU VAT Directive. The characteristics of the schemes were not identical. In broad terms, members’ entitlements and advantages were not wholly and directly driven by investment outcomes, although certain components of those rights and benefits were linked to performance. It is well recognised that Member States’ freedom to define which funds enjoy exemption is constrained. Funds brought within the EU regulatory regime referred to as UCITS are regarded as special investment funds. Their structures and benefit design differed between plans......

Stewart Hastie, chair of the ACA, urged Chancellor Rachel Reeves to handle any tax reforms with caution, proposing that the government’s pension sector review be used to forensically assess any adjustments. He accepted that chancellors may periodically revisit and refine pensions taxation, but emphasised that such shifts must be carried out carefully and with full awareness of the potential impacts on savers and pensioners, pension schemes and employers, all within the context of wider priorities such as enhancing retirement outcomes and fostering economic growth......

Barclays Service Corporation and another v HMRC [2024] UKFTT 785 ( TC) Barclays Service Corporation ( BSC) provided services to fellow entities within the Barclays Corporate Group, including those in a UK VAT group. A UK branch of BSC was entered on the Companies House register in July 2017. In December 2017, an application was submitted to HMRC seeking to include BSC in the UK VAT group. Had it succeeded, the UK VAT group would have avoided having to account each year, under the reverse charge, for sums running into many millions of pounds. HMRC refused the application in March 2018 on two grounds: BSC was ineligible to join the VAT group as it did not have a UK fixed establishment Even if BSC did have a UK fixed establishment, refusal was required under ‘protection of revenue’ powers The taxpayer appealed to the FTT, where an...

Janet Bray Ltd v HMRC [2024] UKFTT 787 ( TC) The taxpayer company supplied consultancy to the pharmaceutical industry and had just one director ( JB) with no other employees. It adopted an avoidance arrangement aimed at delivering tax-free sums to JB by way of loans from an employee benefit trust ( EBT), whilst at the same time obtaining an immediate corporation tax deduction for the taxpayer company’s contributions paid into the EBT. The deduction was said to be justified because the payment was made to an independent company to carry out a review of the business and to produce recommendations as to how key employees, such as directors, ought to be rewarded and incentivised. Although the company accepted that the scheme was ineffective, it nevertheless appealed against HMRC’s PAYE determinations in respect of the loans and the associated penalties. It...

Equity Advisory Ltd & another v HMRC [2024] UKFTT 784 ( TC) A non-party to a substantive appeal asked that specified information be redacted from the decision, which had not yet been published. The non-party was a bank, and the context of the appeal involved the bank making a payment to resolve a claim brought against it. The bank applied to the FTT for an order requiring the final decision to exclude the bank’s identity, the amount of the settlement, and any material that could enable members of the public to discern either the bank or the settlement sum, arguing that these were commercially sensitive issues. The application was made......

In this issue: Private equity and venture capital Employment taxes Taxes management and litigation Real estate tax Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Private equity and venture capital CIOT publishes its response to call for evidence on tax treatment of carried interest The Chartered Institute of Taxation ( CIOT) has issued its reply to the government’s call for evidence concerning how carried interest is taxed. See: LNB News 03/09/2024 5. Employment taxes Upper Tribunal allows HMRC IR35 appeal ( HMRC v S& L Barnes Ltd) In HMRC v S& L Barnes Ltd, the Upper Tribunal ( UT) set aside the First-tier Tax Tribunal’s ( FTT) decision and upheld HMRC’s appeal, concluding that the intermediaries legislation ( IR35) applied to a personal service company supplying the services of former rugby...

Upper Tribunal allows HMRC IR35 appeal ( HMRC v S& L Barnes Ltd) HMRC v S& L Barnes Ltd [2024] UKUT 262 ( TCC) The company arranged for B to deliver services to a variety of media organisations, among them the Times, the Sunday Times and multiple broadcasters. The appeal focused on two agreements spanning 2013 to 2019, under which the company supplied B’s services to Sky TV. Revenue from these engagements accounted for roughly 60% of the company’s takings, with most of the remainder arising from newspaper column work. The FTT applied the three-limb test from Ready Mixed Concrete ( South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 to the hypothetical agreement between Sky and B. Both parties accepted that the first two limbs—mutuality of obligation and control—were met, leaving the third limb as the principal point in...

Bilfinger Salamis UK Ltd v HMRC [2024] UKFTT 736 ( TC) The appellant, Bilfinger UK, had originally provided services to an operator of North Sea oil platforms using its own staff. The structure was later altered to an offshore employment model intended to sidestep employers’ NICs. Under this arrangement, the core Bilfinger UK workforce was moved to a Guernsey entity, Bilfinger Guernsey, which then supplied that labour back to Bilfinger UK. That team continued working on the platforms, taking direction from Bilfinger UK, in order to discharge Bilfinger UK’s contract with the platform operator. The question for the FTT was whether paragraph 9 of Schedule 3 to the Social Security ( Categorisation of Earners) Regulations 1978, SI 1978/1689 (para 9) applied so that, notwithstanding the core team being employed by a foreign ( Guernsey) employer, Bilfinger UK was the party liable for...

In this issue Companies and corporation tax Employment taxes VAT Real estate tax Incentivised investment Taxes management and litigation Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax FTT reviews statutory construction of the loan relationship rules ( UK Care No1 Ltd v HMRC) In UK Care No1 Ltd, the First-tier Tax Tribunal ( FTT) considered an appeal concerning how the loan relationship rules in Part 5 of the Corporation Tax Act 2009 ( CTA 2009) should be read. The issue was whether losses arising from a loan relationship could be denied where they related to a period when the company intending to use the loss fell outside the UK tax net. The provision at stake was CTA 2009, s 327, on the...

Expensive and Unequal On 26 August 2024, the Fabian Society called on the new government, via a report, to overhaul pension tax relief, suggesting reforms could raise around £10bn annually. The report, titled ' Expensive and Unequal', set out measures including adopting a flat, single rate for pension tax relief. According to the document, relief on pension contributions climbed to £66bn in 2022–2023—55% higher than in 2016–2017—yet £22bn was taken back through taxes on pensions in 2023. ' The UK cannot afford to maintain such a costly and badly targeted system,' said Andrew Harrop, general secretary of the Fabian Society and the report’s author, in a statement. He added that the Chancellor of the Exchequer, Rachel Reeves, should 'raise revenue while also safeguarding family living standards and sticking to Labour’s manifesto pledges'......

Go City Ltd v HMRC [2024] UKFTT 745 ( TC) Go City sold passes that let buyers access London attractions and certain transport services without paying again. Following earlier VAT disputes over these passes, the business changed the pass terms; when the matter returned to the tribunal, the pass was treated as a voucher. From 2019, the UK adopted revisions to the voucher regime prompted by the EU Voucher Directive. HMRC first indicated that the pass would not meet the revised voucher definition. Seeking to keep the initial sale outside the scope of VAT, Go City adjusted its model. In broad terms, the new approach worked as follows: Go City sold customers a bundle of credits redeemable against different attractions when a pass was used to gain entry, the attraction provided Go City with a right of admission at an agreed price Go City...

R (oao UBS AG) v HMRC and another [2024] UKUT 242 ( TCC) As part of JW’s reward package, UBS and JW (then an employee) entered into three options over gilts in 2002. The options were not taken up until 2012, after JW had left the business, and delivery of the gilts did not occur until 2016/17 because of valuation problems. HMRC issued a determination under regulation 80 of the PAYE Regulations requiring the company to account for PAYE. The company disputed that determination, advancing a number of lines of attack, one of which asked HMRC to exercise its discretion under section 684(7A) of the Income Tax ( Earnings and Pensions) Act 2003. HMRC responded that it was not appropriate to decide whether to deploy that discretionary power at that juncture, as the ultimate liability had not yet been fixed. UBS sought judicial review of......

UK Care No 1 Ltd v HMRC [2024] UKFTT 542 ( TC) What are the practical implications of this case? The circumstances of this dispute are atypical and, at first blush, one might assume the outcome has significance only where closely aligned facts present themselves. Even so, as the judge pointed out, there have been no decided cases addressing CTA 2009, s 327, nor its antecedent provision, and therefore the ruling will attract attention from practitioners operating under this legislation more generally. Moreover, the decision articulates overarching principles on the manner in which a Tribunal or a court may approach construing the provision, with particular emphasis on the commercial reality of the losses in question. Commercial reality is invariably an evidential issue, yet the judgment reinforces the need to evaluate in a disciplined way how that commercial reality is to be shown when one is...

Mainpay Ltd v HMRC [2024] UKUT 233 ( TCC) Mainpay, an umbrella company, supplied the usual administrative and PAYE services to temporary workers whom it engaged and placed through employment agencies with end clients in hospitals and schools. It contended that, because those workers were engaged under a continuing, overarching contract (that is, a single employment), every site where they undertook assignments was a temporary workplace, so travel and subsistence were deductible from their earnings for tax. It also argued that, as each assignment was brief, the individuals could not be said to attend any workplace ‘regularly’, and therefore none could be permanent. HMRC’s position was that each assignment constituted a separate employment involving attendance at a permanent workplace, so reimbursed travel was taxable, leading to PAYE determinations and NICs decision notices (see News Analysis: FTT decides travel expenses paid to workers by an...

By the 2027–2028 fiscal year, one in five retirees will be paying the 40% higher rate on pension income, according to data obtained by Quilter from HM Revenue & Customs ( HMRC). Of the 3.1 million affected, 2.7 million people aged 60 or above are expected to be drawn into that higher income tax band during the period from 2023 to 2028. A further 400,000 individuals will tip into the 45% additional rate, according to the wealth management firm, the company said. On 22 August 2024, Jon Greer, Quilter’s head of retirement policy, warned in a statement that frozen thresholds mean the count of pensioners liable for higher and additional income tax rates is set to rise sharply by 2028. The previous Conservative government imposed a freeze on income tax thresholds in 2021 to claw back revenue during the...

Winfield v HMRC [2024] UKFTT 734 ( TC) The taxpayer acquired, in a purchase, a property comprising two self-contained accommodation areas. For ease, they were described as: ‘dwelling 1’. Vacant at the time, it featured a spacious bedroom, an open-plan lounge/dining space, a kitchen, a bathroom, and its external entrances; and ‘dwelling 2’. This housed the taxpayer’s family and included four bedrooms, two bathrooms, reception areas, and separate outside doors. The two units, once part of a single home, were divided by sound- and fire-resistant doors. Both relied on one oil-fired boiler providing hot water and central heating, though the radiators were controlled by independent thermostats. Although two electricity meters were installed, charges for electricity and oil were billed to the......

In this issue: Taxes management and litigation VAT International Employment taxes Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Taxes management and litigation Tribunal Procedure Committee consults on proposed changes to FTT rules on the provision of written reasons for decisions The Tribunal Procedure Committee ( TPC) has opened a consultation to gather views on prospective changes to the rules for every Chamber of the First-tier Tribunal, including the Tax Chamber, and for the Employment Tribunals. For the First-tier Tribunal ( Tax Chamber) in particular, the suggestions are to: (1) remove the need for the parties’ consent before the FTT issues a short, unreasoned written outcome; (2) where no full written decision has been given, shorten the period to request one from the FTT from 28 days to 14; and (3)...