Legal News

Court of Justice rules that toll manufacturer is not a fixed establishment for VAT purposes ( SC Adient Ltd & Co KG v Agentia Natională de Administrare Fiscală and Agentia Natională de Administrare Fiscală) SC Adient Ltd & Co KG v Agenția Națională de Administrare Fiscală , Case C-533/22 The dispute related to toll manufacturing within a corporate group comprising a German company ( Adient DE) and a Romanian company ( Adient RO), operating in the production and sale of seats and other motor vehicle components. Adient RO provided manufacturing services, along with ancillary functions such as administering and storing raw materials and finished goods, to Adient DE. Ownership of the inputs and components always remained with Adient DE throughout the process... Adient RO treated these supplies as falling outside Romanian VAT by applying the general B2B place of supply rule in Article 44 of the VAT...

HMRC v Basic Broadcasting Ltd [2024] UKUT 165 ( TCC) The UT concluded the FTT had fallen into an error of law when analysing the notional contract of the relevant worker with the client, taking account of Court of Appeal guidance in HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501. From 6 April 2012 until 5 April 2017, television and radio host Adrian Chiles delivered his services to ITV and the BBC via his personal service company, Basic Broadcasting Ltd. HMRC took the view that the intermediaries legislation (widely known as IR35) was in point, and issued determinations against the personal service company for income tax of £1,249,433 and National Insurance contributions totalling £460,739. The proceedings have experienced significant delay. The first FTT hearing, timetabled for November 2019, was called off due to illness. The FTT’s decision, released in February 2022 in favour of the...

Watts v HMRC [2024] UKUT 168 ( TCC) The arrangement broadly comprised the following principal stages: first, the taxpayer, funded by borrowings, purchased gilt strips valued at £1.5m; second, an option to acquire those strips was conferred on an interest in possession trust, of which the taxpayer was both settlor and life tenant, in exchange for a premium of approximately £1.35m, with an exercise price fixed at £150,000; third, the option relating to the gilt strips was assigned to Investec, a bank, for £1.35m, that amount being paid to the trustee of the trust; and finally, Investec exercised the option and made the corresponding payment of the £150,000 exercise price to the taxpayer. Invoking Finance Act 1996, Sch 13, para 14A, the taxpayer then claimed an income tax loss of £1.35m for the 2003/04 tax year......

Blackrock Holdco 5, LLC v HMRC [2024] EWCA Civ 330 What was the background? In April 2024, the Court of Appeal delivered its decision in the Blackrock appeal. The dispute focused on whether companies could deduct interest under the transfer pricing ( TP) rules and the Unallowable Purpose Rule, as set out in sections 441–442 of the Corporation Tax Act 2009. A US-headed group deployed a debt-financed, Delaware-incorporated SPV that was UK tax resident ( LLC 5) within the structure for acquiring a US target. LLC 5 took an interest-bearing loan from its US parent ( LLC 4) of approximately $4bn to purchase preference shares issued by the acquisition vehicle ( LLC 6), which generated non-taxable income. LLC 5 sought to surrender its tax losses, for no consideration, to other UK entities within the Black Rock group as group relief. HMRC contested the interest...

JTI Acquisition Company (2011) Ltd v HMRC [2024] EWCA Civ 652 The appellant, JTI Acquisition Company (2011) Ltd ( JTIAC), was a UK-resident entity established by a US group to act as an acquisition vehicle. The US group had entered into a commercial deal to purchase another US-headed group, LTT, for $1.1 billion. To finance half of the consideration, debt was pushed down from the US by JTIAC issuing interest-bearing loan notes to a US group member. After the deal completed, JTIAC claimed around £40 million of corporation tax deductions over time on the loan note interest, which it surrendered to profitable companies within the UK group. For US tax, a check-the-box election was made so there was no taxable receipt in the US to mirror the UK deductions......

The Liberal Democrats said they would indeed almost double capital gains tax for the highest earners if they managed to form a majority government after the 4 July general election. Capital gains is a levy on the profit made when an asset is sold. At present, the top rate is currently 24%. The Lib Dems intend to increase it to 45% under their plans. Ed Davey, the party’s leader, told a press conference unveiling the manifesto that it is only right the very, very wealthiest in our country pay more tax, insisting that when our public services are right now crying out for......

At the Manchester manifesto launch, the Labour leader pledged his administration would set up a National Wealth Fund capitalised at £7.3bn ( US$9.3bn) across the next Parliament. Its purpose is to speed the shift to clean energy and support industry while drawing in private co‑investment alongside public funds. The fund’s remit would be clean power and industrial investment, targeting £3 of private capital for each £1 of state funding. A Labour administration would likewise undertake a wide-ranging review of pensions, including measures to lift workplace scheme investment into domestic markets. “ This is a changed Labour Party with a plan for growth,” Starmer told delegates. “ We are pro‑business and pro‑worker — the party of wealth creation.” He added that his party, polling 20 points ahead of the governing Conservative Party, reaffirmed prior commitments not to raise income tax, National Insurance or VAT if...

At Silverstone, the Midlands Grand Prix circuit, the Prime Minister unveiled his party’s general election manifesto, promising to cut employees’ National Insurance contributions, taken from wages, to 6% by April 2027—provided the Conservatives overturn their roughly 20-point polling gap. The Conservative administration has already reduced the rate in two stages, from 12% in November to 8% in March. The 80-page manifesto also outlines an ambition to scrap the levy altogether over time. Sunak restated his party’s adherence to the pensions triple lock, ensuring the state pension rises each year by average earnings, inflation, or 2.5%, whichever is higher. He also reiterated a May pledge that state pension payments would always remain below the income tax threshold, as part of a plan......

Revenue and Customs Commissioners v Burlington Loan Management DAC [2024] UKUT 152 ( TCC) What are the practical implications of this case? This ruling will be welcomed by the secondary debt market, as pricing for debt transfers commonly reflects whether relief under a double tax treaty is available. In this instance—mirroring standard practice—the consideration for the debt claim tracked market value but was adjusted to recognise that some buyers could access a domestic exemption from UK withholding tax or rely on double taxation treaty provisions, so UK withholding tax was not a lasting cost. Commercially, at the point of the offer SICL would have appreciated that BLM was outside the scope of UK withholding tax, though it would not have known the precise rationale. Embedded in BLM’s bid was the expectation that interest arising on the claim would be taxed in Ireland rather than the...

Spectrum Community Healthcare CIC v HMRC [2024] UKUT 162 ( TCC) The taxpayer, Spectrum, was contracted to provide a joined-up primary healthcare offering in prisons, mirroring the level of care available from the NHS in the wider community. Delivery took place under agreements with NHS England ( NHSE). The key question was whether Spectrum supplied one exempt healthcare service, or instead made distinct supplies: exempt medical care and taxable prescription medicines and contraceptives. The FTT determined there was a single exempt supply of primary healthcare, or health and social care. Spectrum appealed to the UT on four grounds. Its first ground concerned the sequence in which the FTT addressed the issues. The tribunal examined the single versus multiple supply point first, then moved to the exemption question. This ground, closely connected to the second, was treated relatively briefly. The UT held it was...

D’ Angelin v HMRC [2024] UKFTT 462 ( TC) The taxpayer was UK-resident but not domiciled and used the remittance basis. In 2016 he brought £1.5m of overseas income to the UK and placed it into a UK company where he was the sole shareholder and director. That company operated providing advice to international clients and family-owned holdings. He claimed business investment relief under section 809VA of the Income Tax Act 2007 ( ITA 2007) in relation to the investment, with the result that the £1.5m was treated as not remitted to the UK (and therefore not taxable). During 2017/18 he used the company credit card for private spending, from an i Tunes subscription through to the personal use of a jet, and those outgoings were posted to his director’s loan account. The balance on that account peaked at about £71,000. At all times he held...

HMRC v Burlington Loan Management DAC [2024] UKUT 152 ( TCC) Background of the dispute After LBIE’s collapse, trading in its debt claims sprang up on a secondary market. The administrators ultimately realised enough assets to discharge all liabilities in full, creating a surplus from which statutory interest on those debts was paid. The Supreme Court determined that the statutory interest arising in the LBIE administration constituted yearly interest and was therefore subject to UK income tax withholding unless an exemption or relief applied (see News Analysis: Administration— Supreme Court confirms statutory interest can be yearly interest ( HMRC v Joint administrators of LBIE)). In the circumstances here, a claim against LBIE was transferred by SICL—then in liquidation—to Burlington, via an interim assignment to a broker engaged by SICL’s liquidators to sell the claim. As LBIE’s liquidators had already returned the £142m principal to SICL, the right...

The Prudential Assurance Company Ltd v Revenue and Customs Commissioners [2024] EWCA Civ 300 What are the practical implications of this case? Section 43 of the Value Added Tax Act 1994 stipulates that dealings between entities within the same VAT group are to be disregarded, and any supply by a member is treated as made by the representative member. Regulation 90 of the VAT Regulations 1995, SI 1995/2518, provides that continuous supplies are regarded as made at the time an invoice is issued or payment is received, whichever occurs earlier. The point arising in this appeal is which provision takes priority. Put simply, the dispute concerns which of these VAT rules governs in priority here. In the absence of a Supreme Court ruling resolving the interaction of these two provisions, the Court of Appeal’s judgment cautions suppliers about the consequences to weigh when deciding to leave a VAT...

In this issue: International Taxes management and litigation VAT Employment taxes Lex Talk®Tax: a Lexis®Nexis community Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information International Upper Tribunal dismisses HMRC’s appeal in Burlington Loan Management In Burlington Loan Management, the UT rejected HMRC’s appeal, endorsing the FTT’s conclusion that the Irish tax‑resident company could claim the UK– Irish DTT exemption from UK withholding tax on UK‑source annual interest. Despite the fact the Irish entity had acquired the relevant debt from a Cayman Islands company (which itself did not qualify for any UK withholding tax relief), the FTT was, on the evidence, entitled to find that neither party’s primary objective was to secure the treaty withholding exemption, meaning the DTT’s anti‑abuse clause was not triggered. See: HMRC v...

MWL International Ltd and Maywal Ltd v HMRC [2024] UKFTT 402 ( TC) The companies dealt in tangible commodities, sourcing from multiple overseas jurisdictions and supplying markets across the Middle East. From 1989 onwards, the company owned or leased vehicles that were luxury limousines fitted with telephone capability (using Bluetooth during the years under appeal). The cars were provided to clients visiting the UK and, at other times, were placed at the disposal of, and used by, one or more directors and employees, notably W, his spouse LW, and his son MW. Save for a single vehicle, the fleet was kept at the home of W and LW, which also functioned as the company’s registered office. In 2021 HMRC issued determinations imposing Class 1A NICs in relation to the vehicles, and the company brought an appeal. It maintained that the vehicles met the...

Revenue and Customs Commissioners v Hotel La Tour Ltd [2024] EWCA Civ 564 What are the practical implications of this case? This ruling may (potentially) touch any company that incurs professional charges when disposing of shares in a subsidiary. The FTT and UT had earlier ruled in HLT’s favour, suggesting that recoverability of VAT on fees tied to a share disposal turned on an objective review of how the sale proceeds were intended to be used, with the consequence that such costs were treated as overheads and the VAT deductible. Given the sizeable transaction expenses typically arising on share disposals, those outcomes attracted strong interest across many corporate groups. The CA, however, has overturned the FTT and UT, restating VAT’s character as a tax on transactions. In the CA’s view, whether input VAT bears a direct and immediate link to an exempt supply (and is...

Nottingham Forest Football Club Limited v HMRC [2024] UKUT 145 ( TCC) Following dialogue with HMRC, the Club received a VAT assessment arising from figure discrepancies that had innocently resulted from a changeover in its accounting systems. The Club appealed, contending that the assessment was issued more than one year after HMRC had in its possession sufficient factual evidence to make the assessment......

In this issue: Fiscal events including Budget Brexit and tax VAT Taxes management and litigation Employment taxes Devolution International Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Fiscal events including Budget Finance ( No 2) Act 2024 receives Royal Assent As noted in last week’s Tax weekly highlights, following the Prime Minister’s general election announcement on 22 May 2024, the outstanding stages of the Finance ( No 2) Bill in both Houses of Parliament were expedited and finalised ahead of Parliament’s prorogation on 24 May 2024. Royal Assent was given the same day, so the Bill entered the statute book without alteration. For details on the legislation and its route through Parliament, see Tax— Finance Act 2024 and Finance ( No 2) Act 2024...

What are the practical implications of this case? In Larry Trachtenberg v the Commissioners for His Majesty’s Revenue and Customers [2024] UKFTT 376 ( TC), the ruling carries clear, practical consequences for advisers. Appreciating the decision’s effect will support practitioners when advising on HMRC’s use of TMA 1970, s 29 to raise ‘discovery’ assessments aimed at recovering tax said to be due because of unauthorised pension scheme payments. The Tribunal confirmed that the functioning of FA 2004, s 255 does not prevent HMRC from relying on its TMA 1970 powers in circumstances comparable to those encountered in Mr Trachtenberg’s case. In addition, the Tribunal explained its approach to deciding whether a taxpayer has acted ‘deliberately’, so that the extended time limits in TMA 1970, s 36(1A) may apply, taking guidance from the Supreme Court authority of HMRC v Tooth [2021] UKSC 17 at para...

L v HMRC [2024] UKFTT 401 ( TC) The taxpayer sought a hearing in private and anonymisation on two main grounds. The first concerned a substantial threat to her health. She had bipolar disorder and had gone through repeated episodes of psychosis, depression and anxiety. Her earliest episode, precipitated by workplace stress, was, in her view, the foundation for the discriminatory treatment she considered she had received from her employer. The prospect of a public hearing intensified her anxiety, and her psychiatrist’s opinion was that compelling her to face the pressures of a public forum created a high risk of relapse. These matters were central to her request. As its starting point, the FTT turned to Rule 32 of the Tribunal Rules, the provision that mandates that all hearings be held in......