Legal News

Osmond and Allen v HMRC and KPMG LLP as third party applicant [2024] UKFTT 413 ( TC) Osmond and Allen v HMRC and Stewarts Law LLP as third party applicant [2024] UKFTT 414 ( TC) KPMG and Stewarts Law, as third party applicants, asked the FTT to disclose the skeleton arguments relating to the O& A appeal. KPMG also requested disclosure of any additional written submissions in the O& A appeal. At the point of applying, KPMG acted for three appellants whose appeals were stayed behind O& A, so it sought access in order to advise them. Stewarts sought disclosure because, at that time, it represented three clients considering challenges to assessments under the transaction in securities legislation, including whether the assessments were out of time; that issue arose in the O& A appeal and was therefore ‘directly relevant to [...

In this issue: Fiscal events including Budget VAT International Incentivised investment Taxes management and litigation Real estate taxes Employment taxes Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Fiscal events including Budget General election called for 4 July 2024 The UK Prime Minister, Rishi Sunak, has confirmed a general election for 4 July 2024. Consequently, Parliament will be prorogued on 24 May 2024, with dissolution on 30 May 2024. It is anticipated that Finance ( No 2) Bill 2024 will secure Royal Assent in the next few days. However, given the election timetable, expected legislative changes, including the non-dom reform, are set to pause until a new Parliament is in place. Likewise, there is not enough time to schedule a Budget or other fiscal event before...

What has happened? The Prime Minister ( PM) has confirmed that the next UK general election will take place on 4 July 2024. This is the first such announcement since DCPA 2022 reinstated the Sovereign’s prerogative to dissolve Parliament on the PM’s advice. What follows is guided mainly by parliamentary convention rather than statute. The headline timetable is: 22 May — PM asked the King to dissolve Parliament 22 May — King Charles agreed; the election was announced to the country 23 May — ‘ Wash-up’ period starts 24 May — Parliament prorogued 25 May — Pre-election period of sensitivity begins (formerly ‘purdah’) 30 May — Parliament dissolved 30 May — Pre-election period begins 4 July — General Election What does ‘wash-up’ mean? ‘ Wash-up’ is the stretch between calling a general election and...

Kwik- Fit Group Ltd and others v Revenue and Customs Commissioners [2024] EWCA Civ 434 What are the practical implications of this case? This Court of Appeal ruling underscores the need to assess the unallowable purpose rule whenever a debt reorganisation or refinancing is contemplated. It confirms that an unallowable purpose can be acquired under fresh arrangements applied to existing borrowings—even where the original funding was commercial, the revised interest charged as part of the restructure is at an arm’s length rate, and the losses to be utilised arose in unobjectionable circumstances. Tax advantages envisaged for a group may comprise part of the taxpayer’s purpose, so group tax planning should proceed on that basis. The judgement makes plain that hindsight offers no aid—showing after the event that no tax benefit ultimately accrued will not forestall the rule’s application, which turns on the...

HMRC v Hotel La Tour Ltd [2024] EWCA Civ 564 Hotel La Tour Ltd ( HLT) delivered management services to a wholly-owned subsidiary. Both entities were within the same VAT group. The subsidiary owned a Birmingham hotel, which HLT opted to sell to finance the development of a new hotel in Milton Keynes. The funding was realised via a sale of shares. HLT sought to reclaim VAT on the marketing and legal fees linked to the subsidiary’s disposal, arguing the services were directly and immediately connected to its downstream taxable activities, namely developing and operating the Milton Keynes hotel, and not to the exempt share sale. HMRC refused input tax deduction on the basis that the expenditure was directly and immediately connected to the exempt share sale. The FTT and the UT agreed with HLT, holding that the input tax was...

Elphysic Ltd and other companies v HMRC [2024] UKFTT 00291 ( TC) What are the practical implications of this case? In a very detailed and comprehensive decision, the FTT concluded that the payroll arrangement in which the lead appellants participated, which split and disaggregated labour supplies across a web of thousands of linked MUCs, each with only a handful of staff, none of which operated independently and all subject to outside control, was an artificial construct aimed at avoiding tax, and that there were objective reasons to determine the lead appellants’ VAT registrations had been deployed for fraudulent ends. Against that backdrop, the lead appellants achieved a measure of, albeit limited, success on a pleading issue, and, in this context, the tribunal offered a helpful review of the relevant principles that apply when alleging dishonesty in pleadings. In this matter, however, the FTT...

Hugh Osmond and another v HMRC [2024] UKFTT 378 ( TC) The taxpayers were individuals resident in the UK and entrepreneurs, being serial entrepreneurs. They subscribed for shares qualifying under the EIS in a company named Xercise Ltd. The company had originally run a loss-making sports club operation, which was disposed of by sale. The taxpayers kept their stakes and retained the company, repurposing it as a corporate holding vehicle to back another business venture. When that venture was subsequently sold, they inserted a new parent company ( Xercise2 Ltd), intended to inherit the EIS status, and Xercise Ltd was then wound up thereafter. In March 2015, the taxpayers and Xercise2 Ltd made share buy-backs, and the taxpayers contended that the sums they received were a capital return, fully relieved from CGT under EIS disposal relief, so no chargeable gain arose. HMRC......

R (oao Sensor Solutions Ltd) v HMRC [2024] EWHC 1119 ( Admin) Sensor Solutions participated in an employer‑financed retirement benefit scheme ( EFRBS) in the 2012–13 tax year. After the loan charge provisions came into force in 2017, the company entered a voluntary settlement in relation to the scheme in 2019. In April 2021, Sensor Solutions sought repayment of that settlement through the DRRS, which was put in place by section 20 of the Finance Act 2020 ( FA 2020) following the Morse review into the loan charge. HMRC refused to repay on the ground that the company had not provided a ‘reasonable disclosure’ of the scheme in its tax returns, as required by the legislation, contending the statutory disclosure condition had not been met. That refusal was upheld on an internal review conducted by another HMRC officer. The company therefore issued judicial review...

FTT examines whether purported options are truly options for capital gains tax purposes ( Krishnamohan & another v HMRC). Krishnamohan and another v Revenue and Customs Commissioners [2024] UKFTT 346 ( TC) What are the practical implications of this case? In probing the essence of what an option actually is, this ruling will attract attention across numerous tax and non-tax fields, spanning commercial, corporate and real estate settings. Even within tax alone, the presence or absence of an option in a given arrangement can affect the operation of multiple taxes. By way of illustration, Landmaster Investment Ltd & another v HMRC [2023] UKFTT 736 ( TC) highlights how characterising an agreement as an ‘option’ can matter for SDLT, and likewise demonstrates the resort to non-tax authorities when determining the meaning of an option. The Tribunal’s conclusion here turned on what it considered a...

In this issue: Finance Real estate tax VAT Taxes management and litigation Employment taxes Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Finance Following last week’s Tax weekly highlights, the Court of Appeal in Kwik- Fit Group Limited v HMRC [2024] EWCA Civ 434 confirmed the First-tier Tax Tribunal ( FTT) and Upper Tribunal ( UT) conclusions that the appellants participated in the loan relationships with an unallowable purpose. The appellate court therefore dismissed the appeal. See News Analysis: Court of Appeal dismisses appeal on loan relationships unallowable purpose rule ( Kwik- Fit Group Ltd v HMRC). The judgment concerns unallowable purpose in loan relationships, aligning with tribunals’ reasoning at both levels. Real estate tax The Court of Appeal determined that HMRC should adopt a more flexible reading of the CIS...

Beech Developments ( Manchester) Ltd and others v HMRC [2024] EWCA Civ 486 There are two distinct regimes within the Income Tax ( Construction Industry Scheme) Regulations 2005 ( SI 2005/2045). Regulation 9 permits HMRC, where it is fair and reasonable, to refrain from collecting CIS duties, while regulation 13 deals with both the collection and enforcement of liabilities actually due. The decision exposed how these parallel provisions fail to dovetail neatly. Under regulation 9 of the CIS Regulations ( SI 2005/2045), HMRC may decline to pursue CIS deductions in specified situations. One such instance is where HMRC is satisfied that the recipient has already returned the income on their own tax returns, since pressing for payment again would amount to double taxation. The case highlighted the practical tension between discretionary non-collection and the machinery for enforcing sums assessed in...

Gillian Graham t/a Skin Science v HMRC [2024] UKFTT 352 ( TC) Item 1 of Group 7 of Schedule 9 to the Value Added Tax Act 1994 ( VATA 1994) grants exemption for supplies of medical care made by persons who are registered or enrolled in the relevant registers. The appellant, being a registered general nurse, appeared on a suitable register and thus fulfilled one of the criteria for exemption. HMRC, however, took the position that the skin treatments supplied were overwhelmingly cosmetic in nature rather than supplies of medical care. It therefore registered the appellant for VAT and issued an assessment. Convinced that all her treatments were exempt, the appellant filed a nil VAT return, which led to the assessment being cancelled. HMRC then raised a further assessment, said to cover a slightly different period and for a different amount. The key...

Kwik- Fit Group Ltd and others v HMRC [2024] EWCA Civ 434 Background The appellants participated in an intra-group debt reorganisation in which: loan receivables due from the appellants were transferred to an intermediate holding company, Speedy 1 Ltd ( Speedy 1) (the Assigned Loans) new loan receivables were put in place in Speedy 1’s favour (the New Loans) the interest rates on the Assigned Loans, together with a loan already owed by one appellant to Speedy 1 (the Pre-existing Loan), were increased to match the arm’s length rate prevailing at that time At that time, Speedy 1 held around £48m of non-trading loan relationship deficits ( NTLRDs) carried forward from earlier periods. Under the loss relief rules then in force, those NTLRDs were effectively trapped within Speedy 1 and could not be utilised by other members of the group......

In this issue: VAT Taxes management and litigation Employment Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information VAT FTT considers whether supplier invoices contained sufficient description to enable taxpayer to recover input tax ( Fount Construction Ltd v HMRC). As highlighted in last week’s Tax weekly highlights, in Fount Construction Ltd [2024] UKFTT 340 ( TC), the First-tier Tax Tribunal ( FTT) upheld the appellant’s case, overturning HMRC’s decision to block its input tax claims on three invoices. See News Analysis: FTT considers whether supplier invoices contained sufficient description to enable taxpayer to recover input tax ( Fount Construction Ltd v HMRC). Taxes management and litigation HMRC publishes Stakeholder Digest: 1 May 2024. HMRC’s latest Digest notes the following: changes to reporting income from self-employment and partnerships: from April 2024, sole traders and partners must report profits on a tax year basis; interactive guidance to calculate...

One of the clinic’s visitors was a tenant on the brink of being evicted from his supported housing. Within minutes, the AI systems digested and distilled the hundreds of pages he’d brought along — a workload no person could have tackled so swiftly. By the close of the appointment, he left with a set of referrals and a clear plan for what to do next. ‘ It’s quite extraordinary. Fifteen or 20 minutes to research, draft referrals and next steps, and cover every client question isn’t much time. It’s rapid-fire,’ said Nikki Endsley, a solicitor with the non-profit Lawyers’ Committee for Civil Rights of the San Francisco Bay Area, who co-runs the clinic, speaking to Law360. ‘ The speed with which AI can accelerate our work, boost efficiency and, as a result, make us stronger advocates is genuinely...

Foulkes v Revenue and Customs Commissioners [2024] UKFTT 322 ( TC) What are the practical implications of this case? Grasping the significance of this ruling will support practitioners in guiding clients on the tightly defined regime in FA 2004 concerning which payments registered pension schemes are permitted to make and the ramifications of any unauthorised payments. The purpose of the framework is to ensure that tax reliefs and exemptions on contributions to a registered pension scheme apply only where the scheme genuinely provides for members’ retirement benefits. The sole payments a registered pension scheme may make to an individual who is, or has been, a member are those set out in FA 2004, s 164. If an unauthorised member payment is made, FA 2004, s 208 imposes an income tax charge at 40% on the recipient, referred to as the...

Upham and others v HSBC UK Bank plc [2024] EWHC 849 ( Comm) The claimants were all investors in the Eclipse arrangement, a scheme designed to permit individuals to defer their tax liabilities by investing in limited liability partnerships ( LLPs) connected to the film industry. In summary, participants would take out borrowing to finance capital contributions into an LLP, and could thereafter set the interest on those loans against other income. The structure had been put together by an HSBC employee ( B) and was promoted by Future Films. It ultimately failed because the LLPs were held not to be trading: see Eclipse Film Partners ( No 35) LLP v HMRC [2015] EWCA Civ 95. The claimants sought to recover from HSBC the losses they said they suffered as a consequence of the scheme’s failure, including their...

Original news Dr Y ( CAS-37814- G1K9)—20 December 2023 Summary The DPO has partly turned down a complaint that a member was misled into leaving a pension scheme to avoid a lifetime allowance tax charge. It concluded there was no causal link between the scheme’s communications and the decision to opt out. The scheme had not provided advice or a recommendation. However, the scheme administrator was found to have committed maladministration due to delays in replying to the member’s complaint and by overpaying the retirement lump sum. The determination serves as a reminder that pension schemes should be cautious not to give advice or direct members towards any particular course of action. What were the facts? Dr Y was a member of the NHS Superannuation Scheme ( Scotland) (the Scheme). The Scottish Public Pensions Agency ( SPPA) administered the Scheme. In 2014 and 2016, SPPA wrote to Dr Y...

Fount Construction Ltd v HMRC [2024] UKFTT 340 ( TC) All three invoices came from one supplier and each bore a single line reading: ‘ Building Works at the above’. A ‘ Job address’ field featured on the paperwork, into which the address of the specific building site was entered. They stated that VAT was charged at the standard rate and then presented a VAT‑exclusive subtotal, the VAT figure, and the overall total......

In this issue: Finance Companies and corporation tax Private equity and venture capital Stamp and transfer taxes VAT Employment taxes Individuals and income tax Reorganisations, restructuring and insolvency Lex Talk®Tax: a Lexis®Nexis community Daily and weekly news alerts Dates for your diary Trackers New and updated content Useful information Finance Court of Appeal reviews the scope of ‘annual interest’ and ‘beneficial entitlement’ for interest WHT ( Hargreaves Property Holdings Ltd v HMRC). As noted in Tax weekly highlights—18 April 2024, the Court of Appeal in Hargreaves affirmed the FTT and UT decisions that the company was required, under section 874 of the Income Tax Act 2007, to deduct withholding tax from specified interest payments. The company maintained that the beneficial entitlement exception in ITA 2007, s 933 was engaged because the right to the...