Legal News

JTI Acquisition Co (2011) Ltd v HMRC [2024] EWCA Civ 652 What are the practical implications of this case? Although this decision may well herald the death knell for tax planning schemes centred on loan relationships (and, at the time of writing, it is unclear whether any of the three unsuccessful appellants will be granted permission to appeal to the Supreme Court), it is equally important to stress what it does not address. Notably, it leaves untouched other ‘unallowable purpose’ provisions, which typically ask what the purposes of the relevant ‘arrangements’ were when taken as a whole: see, recently, Allam [2021] UKUT 291 ( TCC); Euromoney [2023] EWCA Civ 1281; and, most recently, Burlington Loan Management [2024] UKUT 152 ( TCC), with several other cases known to be in the pipeline. In each of these matters, the taxpayer has (so far)...

In this issue Equity capital markets International Taxes management and litigation Real estate tax Business structures Employment taxes VAT Individuals and income tax Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Equity capital markets FCA overhauls listing rules. The Financial Conduct Authority has released new UK Listing Rules ( UKLR), delivering a substantial reset of the UK listing regime and introducing a simpler, more competitive structure. A central feature is a single listing category for commercial companies—replacing the premium and standard categories—within a regime that places greater emphasis on disclosure. The updated UKLR apply from 29 July 2024. For deeper insight into the principal elements of the reforms to the listing regime, see News Analysis: FCA publishes final reforms to listing regime in the new UK Listing Rules sourcebook, and LNB News...

What is the background? In November 2020, the government ordered an external review of the UK listing regime to bolster the UK as a venue for IPOs and to improve capital-raising processes for companies on UK markets, with a clear focus on making listings more attractive and efficient for issuers. The UK Listing Review Report appeared in March 2021, setting out numerous detailed recommendations for the FCA and the government, triggering a suite of consultations on the listing regime and commencing reforms to the prospectus regime. The FCA’s detailed plans for a major overhaul of the listing regime were presented in consultation paper CP23/31 in December 2023. On 11 July 2024, the FCA confirmed the final shape of the restructured regime in Policy Statement PS24/6 and issued the new UK Listing Rules Sourcebook, which will replace the Listing Rules on Monday 29 July 2024. The end...

HMRC v Mr Taher Suterwalla and Mrs Zahra Suterwalla [2024] UKUT 188 ( TCC) The taxpayers purchased a family home incorporating an indoor swimming pool, gardens that included a pavilion and a tennis court, and a paddock. On the same day as the acquisition (but following completion), they granted a one‑year grazing lease of the paddock to a neighbour for rent of £1,000 per annum. The FTT concluded that the paddock was not part of the grounds of the house and, as a result, the subject matter of the acquisition overall encompassed land that was not residential, so the generally lower mixed‑use rates of SDLT applied to the transaction. HMRC appealed to the UT on the basis that the FTT erred by taking the grazing lease into account when assessing whether the paddock was part of the grounds of the house and, in the...

What are the practical implications of this case? HMRC began enquiries into the taxpayer’s returns for 2015/16 and 2016/17, and in October 2021 it served an information notice. That notice requested information and documents across twelve categories, including: Bank statements and accounts for a Hong Kong company where the taxpayer had been a director Bank statements for a US account with Chase, together with details of any other overseas accounts Correspondence and information about a loan to the taxpayer used to invest in a company The taxpayer appealed. What was the background? The FTT first examined whether any of the material sought by the notice amounted to statutory records (for which there is no right of appeal). It found that none did. Although certain items had been statutory records originally......

Cooke v Revenue and Customs Commissioners [2024] UKFTT 272 ( TC) What are the practical implications of this case? Cooke (and the earlier authority it followed, Lobler [2015] UKUT 152) is very good news for clients (and advisers) whose paperwork fails to capture their commercial intention because of a mistake. It illustrates the FTT’s readiness to employ, in an indirect way, the equitable remedy of rectification to amend documents to favourable effect, even where the principal outcome is a tax saving. The FTT lacks the jurisdiction to order rectification. Nevertheless, Cooke exemplifies the principle that, if the Tribunal is satisfied that, were appropriate proceedings issued in the High Court, the High Court would grant rectification, then the Tribunal ought to proceed as though such rectification had been granted. The threshold for concluding that the High Court ‘would order’...

Jelly Vine Productions Ltd v HMRC [2024] UKFTT 562 ( TC) The taxpayer aimed to sidestep a full hearing by seeking an initial ruling on whether HMRC’s determinations could be contested as a preliminary issue. HMRC had concluded that Jeremy Vine’s BBC engagements between 1 July 2013 and 30 December 2015, on shows including Eggheads and Points of View, fell within the IR35 intermediaries regime ( ITEPA 2003, ss 48–61). While enquiries were still in progress, HMRC issued protective determinations: for income tax under the Income Tax ( Pay As You Earn) Regulations 2003, reg 80, and for National Insurance under the Social Security Contributions ( Transfer of Functions etc) Act 1999, s 8. The HMRC officer qualified those determinations, explaining that there were not yet sufficient facts to form an opinion on employment status and that the assessments did not indicate the stage...

What are the practical implications of this case? ...

The Commissioners for HM Revenue and Customs v Sehgal and Mehan [2024] UKUT 00074 ( TCC)) What are the practical implications of this case? The headline issue here is the method for construing ITA 2007, s 809L. The Upper Tribunal acknowledged that the section was brought in to plug gaps, defects and oddities in the earlier remittance basis regime. Yet it declined HMRC’s argument that this character made it an anti-avoidance measure warranting a more expansive reading than usual. Instead, s 809L falls to be read like any other statutory text: purposively, to decide whether, taking a realistic view, Parliament meant it to catch the transactions in point. On that footing, the pivotal expression, ‘service’, must bear its ordinary sense, informed by its contextual setting. It should not be stretched beyond its natural scope or given a contrived gloss. Had Parliament wanted a broader...

Labour’s manifesto, ‘ Change’, set out a programme the party vowed to deliver once in government, a position it has now achieved. The stream of reform in property law and measures touching the property industry — the Leasehold Reform ( Ground Rent) Act 2022, the Levelling-up and Regeneration Act 2023 ( LURA 2023) and the Building Safety Act 2022 ( BSA 2022) — shows no sign of slowing now Labour holds power. Reforms from recent years continue to shape the property landscape, with no indication of abatement under the new government. Labour’s position suggests continuity rather than pause in this agenda for now. Leasehold and enfranchisement reform The incoming administration must progress the Leasehold and Freehold Reform Act 2024 ( LFRA 2024), which secured Royal Assent in the ‘wash up’ on Parliament’s final day before dissolution. Most of LFRA 2024 will be commenced by...

In this issue: Companies and corporation tax Capital gains tax General Election 2024—parliamentary process, wash-up and manifesto pledges Taxes management and litigation Employment taxes International Lex Talk®Tax: a Lexis®Nexis community Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax Court of Appeal applies Ramsay principle to overturn Upper Tribunal decision in ‘magic’ capital allowances tax scheme ( HMRC v Altrad Services Ltd and Robert Wiseman and Sons Ltd) As noted below, in HMRC v Altrad Services Ltd and Robert Wiseman and Sons Ltd [2024] EWCA Civ 720, the Court of Appeal concluded that, interpreting the legislation purposively, a scheme designed to produce additional capital allowances failed, as the taxpayers had not ‘ceased to own assets’ for the purposes of section 61(1)(a) of the...

HMRC v Altrad Services Ltd and Robert Wiseman and Sons Ltd [2024] EWCA Civ 720 The taxpayers participated in a promoted tax avoidance arrangement intended to take advantage of the capital allowances regime in force during 2010 and 2011. The legislation was later changed, by section 33 of the Finance Act 2011, to ultimately render such structures ineffective. The plan sought to markedly expand the amount of capital allowances available to the corporate taxpayers through a sale and leaseback with a bank. After a few weeks, the companies would obtain the assets again when the bank exercised a put option granted by each company at the outset......

Parliamentary process On 22 May 2024, the Prime Minister, Rishi Sunak, asked the King to dissolve Parliament so a general election could take place on 4 July 2024, and the King consented. As a result, Parliament was prorogued on 24 May 2024 and formally dissolved on 30 May 2024. The parliamentary timetable is set out below: 22 May: The Prime Minister asked the King to use the prerogative to dissolve Parliament 22 May: King Charles approved the request and a general election was announced nationwide 23 May: ‘ Wash-up’ period begins 24 May: Parliament is prorogued 25 May: Pre-election period of sensitivity begins (previously known as ‘purdah’) 30 May: Parliament is dissolved 30 May: Pre-election period starts 4 July: General election 17 July: State Opening of Parliament For an explanation of the ‘wash-up’ period and the period of...

Wardle v HMRC [2024] UKFTT 543 ( TC) The taxpayer held a 15% stake in the LLP, established in June 2015 as a special-purpose vehicle created to build and operate a power plant in Hull. In August 2015, the LLP raised an unsecured loan from a funder and proceeded to enter into more than 50 contracts with a range of counterparties concerning construction, operation and financing of the plant. During 2016, the LLP applied to the Environment Agency for a permit to operate the plant, and that authorisation was granted in May 2017. Commissioning of the plant was formally certified as complete in March 2018; however, no electricity was generated on a commercial basis until June 2019. The taxpayer then disposed of his interest in the LLP in February 2020. He claimed entrepreneurs’ relief in respect of that disposal but, following an enquiry, HMRC...

UK Care No 1 Ltd v HMRC [2024] UKFTT 542 ( TC) The FTT examined the operation of the ‘imported losses’ restriction contained in CTA 2009, s 327. Under that code, relief for a loss arising on a loan relationship is denied to the extent the loss is properly referable to a period during which the company attempting to bring it into account would not have been chargeable to corporation tax on any profits from that same loan relationship. The appellant, which was tax resident in Guernsey, had issued certain loan notes that were secured over the BUPA group’s UK care home undertaking. In 2016, BUPA sought to sell a number of care homes that constituted part of the security package supporting the notes. To enable those transactions to proceed, BUPA acquired the appellant, with the result that the appellant became UK tax...

In this issue: Taxes management and litigation VAT Real estate taxes Oil and gas taxation Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Taxes management and litigation FTT upholds penalties for invalid BADR claims ( Cox and another v HMRC) As outlined below, in Cox and another v HMRC [2024] UKFTT 510 ( TC), the First-tier Tax Tribunal ( FTT) rejected the taxpayers’ appeals against penalties arising from defective entrepreneurs’ relief claims, now termed business asset disposal relief ( BADR). The FTT decided the claimants failed to exercise reasonable care when making the claims, and that HMRC’s choice not to suspend the penalties was not erroneous. See News Analysis: FTT upholds penalties for invalid BADR claims ( Cox and another v HMRC). VAT FTT confirms dip pot formed part of single supply of...

Queenscourt Ltd v HMRC [2024] UKFTT 460 ( TC) Queenscourt supplied takeaway meal combinations featuring hot chicken, fries and a cold dipping pot, with some bundles also offering other chilled items such as cookies and yoghurts. The business had originally accounted for each meal deal as a single standard-rated supply, but subsequently revised its position, concluding that the cold elements, including the dip pots, were distinct zero-rated supplies. HMRC accepted an initial error correction without querying whether the dip pots constituted separate supplies. Later, Queenscourt filed a further error correction covering different VAT periods. On that occasion, HMRC disputed the inclusion of the dip pots and maintained they were an ancillary component of a single supply of hot food, and so shared the same VAT liability (ie standard-rated). That challenge also prompted a review of the VAT repayment arising from the first error...

CATS North Sea Ltd v HMRC [2024] UKFTT 512 ( TC) The taxpayer became the transferee in a hive-down of an interest in a North Sea oil and gas pipeline within the corporate group led by BP plc. For the transferor involved in the hive-down, all activities relating to the pipeline sat wholly within the oil and gas ring fence. In contrast, for the taxpayer, only the transportation of group hydrocarbons was treated as within the oil and gas ring fence, whereas moving non-group hydrocarbons through the pipeline fell outside that ring fence. Following the hive-down, the taxpayer was then sold to a third-party purchaser. The key issues for the FTT to determine were as follows: did the transfer of trade provisions apply to the hive-down notwithstanding that the transferor’s activities regarding the pipeline were entirely within the ring fence, whereas the taxpayer could not at any time...

Cox and another v HMRC [2024] UKFTT 510 ( TC) A married couple, the taxpayers served as directors and minority shareholders in a company that operated as financial advisers. Each owned roughly 6% of the share capital. In 2018, several shareholders, including the couple, chose to sell their shares to other continuing shareholders. During a meeting between the directors and a representative of the solicitors dealing with the sale, EWM, the representative went round the table to confirm that every director and their spouses would be entitled to entrepreneurs’ relief on the disposal. Afterwards, the directors determined that the sale consideration should be divided so as to better reflect each person’s contribution to the business. Consequently, the taxpayers each gifted part of their shareholding to other shareholders. Those gifts qualified for holdover relief but left each taxpayer with a 4% stake in the...

In this issue Companies and corporation tax Employment taxes VAT International Anti-avoidance Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax Court of Appeal confirms a broad scope for the loan relationships unallowable purpose test ( JTI Acquisition v HMRC) As covered in last week’s Tax weekly highlights, in JTI Acquisition Company (2011) Ltd [2024] EWCA Civ 652, the Court of Appeal ( Co A) dismissed outright the taxpayer’s challenge to the disallowance, for corporation tax purposes, of debits for interest payable on the loan notes. The Co A concurred with the First-tier Tax Tribunal ( FTT) and the Upper Tribunal ( UT) that the company entered into the loan notes with an unallowable tax avoidance purpose under the loan...