Legal News

Simon and Joanne Holding v HMRC [2024] UKFTT 337 ( TC) The FTT heard an appeal against a closure notice assessing the appellants to SDLT on the footing that a purchase of a property (being a dwelling) together with land was entirely residential for SDLT purposes. The taxpayers contended, unsuccessfully, that a number of fields comprised within the property were not the grounds of the dwelling for the purposes of section 116(1)(b) of the Finance Act 2003 and instead were non‑residential land, with the consequence that the lower non‑residential rates of SDLT ought to have applied to the transaction. HMRC, however, successfully argued that the whole of the land, including the fields, amounted to the grounds of the relevant dwelling for SDLT, so the higher residential rates were engaged. In addressing whether land forms part of the ‘grounds’ of a dwelling, the FTT applied an...

Qubic Advisory Services Ltd v HMRC [2024] UKUT 106 ( TCC) The supply of investment gold falls outside VAT by virtue of Group 15 in Schedule 9 to the Value Added Tax Act 1994 ( VATA 1994), and traders dealing in such gold must comply with particular invoicing and record‑keeping obligations set out in regulation 31A of the Value Added Tax Regulations 1995 ( SI 1995/2518). Under SI 1995/2518, reg 31A, suppliers are obliged to issue invoices and retain records containing the details specified in a Notice issued by HMRC. The relevant Notice is Gold imports and exports VAT Notice 701/21 ( Notice 701/21), which sets out, with the force of law, the information that must appear on invoices and the records that must be maintained. Notice 701/21 also makes clear that these obligations bite when exempt investment gold is delivered to, or...

A D Bly Groundworks and Civil Engineering Ltd and another v HMRC [2024] UKUT 104 ( TCC) Each taxpayer instructed the same firm of chartered accountants to set up a UURBS arrangement that committed them to paying pensions in future to directors and certain key employees. They recorded accounting provisions in their accounts to reflect the obligation to meet those later pension payments. Amounts booked ranged from 80% to 100% of pre-tax profits for each accounting period. The UURBS was disclosed to HMRC under the DOTAS rules. The FTT had rejected the taxpayers’ challenges to HMRC’s refusal to allow the provisions. The companies then appealed thereafter to the UT. The principal point at issue only......

Ferguson- Davie and another v HMRC [2024] UKFTT 321 ( TC) These appeals were designated as lead cases pursuant to the Tribunal Procedure ( First-tier Tribunal) ( Tax Chamber) Regulations 2009, rule 18, with the related appeals of 24 other individuals, each a limited partner in the relevant limited partnership, stayed behind them pending determination. The issue was whether section 103KA of the Taxation of Chargeable Gains Act 1992, and following (the ‘ Carried Interest Legislation’, applying to carried interest arising on or after 8 July 2015), governed the relevant carried interest sums for the amounts at issue in dispute, or whether the transitional provision in section 43(2) of the Finance ( No 2) Act 2015 (the ‘ Transitional Provision’) applied, which would mean the carried interest sums were taxed in line with the position before the Carried Interest Legislation took effect. If the...

Hargreaves Property Holdings Ltd v HRMC [2024] EWCA Civ 365 What are the practical implications of this case? The Court of Appeal’s handling of ‘beneficial entitlement’ signals that the judiciary will interrogate legal notions through the prism of the statute and, where fitting, adopt a purposive reading. For this taxpayer, however, beneficial entitlement was a settled legal concept that resisted a purposive gloss. As Lady Justice Falk made clear, no statutory notion enjoys immunity from purposive interpretation. The WHT regime is designed to secure collection where the payee of taxable income is outside the UK, and the disputed exemption recognises that those within the corporation tax net are not, for that reason, problematic. That rationale is not engaged on these facts. In addition, the Court of Appeal’s view of ‘yearly interest’ underlines an ongoing readiness to look past discrete steps and to focus on the...

Blackrock Holdco 5, LLC v HMRC [2024] EWCA Civ 330 What are the practical implications of this case? In the wake of this ruling, advisers will find fewer avenues to engineer tax benefits via intra-group borrowing. It will be hard to contend that a facility lacks an unallowable purpose unless it performs a bona fide commercial role within the overall transaction, judged from the wider deal and not merely the borrower’s and lender’s standpoint. A holistic appraisal of the transaction’s commerciality across the group will be central to that assessment. Specifically, where the sole rationale for the debt is to secure a tax saving, it will probably be treated as having an unallowable purpose, with the associated interest deductions refused. The judgment also confirms that, when evaluating the reasons for taking on the loan, directors’ subjective intentions expressed at the relevant board meetings cannot be...

Elphysic Ltd and others v HMRC [2024] UKFTT 291 ( TC) The dispute concerned mini-umbrella companies ( MUCs), also referred to as specialist contracting intermediaries ( SCIs). Within this business arrangement (the Scheme), a MUC employs individuals and administers payroll, claiming the employment allowance. The supply chain operates so that a MUC supplies staff to employment intermediary companies, which in turn supply staff to recruitment agencies, who then supply workers to the end-users. The MUC levies VAT at the standard rate on its supplies and accounts for VAT under the flat rate scheme for small businesses. The FTT reviewed the Value Added Tax Regulations 1995 ( SI 1995/2518), notably reg 55M(1)(f)(iii), which states that a person cannot use the FRS if associated with another person. It also considered reg 55A(2), which provides that persons are associated where one’s business activities are under the...

In this issue Budget and Finance Bills Finance International Companies and corporation tax Real estate tax Employment taxes VAT Taxes management and litigation Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Budget and Finance Bills Tax Administration and Maintenance Day 2024 Following the Spring Budget 2024, Tax Administration and Maintenance Day ( TAMD) 2024 was held on Thursday 18 April 2024. The government outlined a set of four technical tax policy measures, namely: an update on tackling non-compliance across the umbrella companies market; a consultation concerning VAT on private hire vehicles; a consultation to mandate postcode provision for NICs reliefs in a Freeport or Investment Zones; and an update on the VAT treatment of charitable...

Hargreaves Property Holdings Ltd v HMRC [2024] EWCA Civ 365 The background The borrower, a UK-resident taxpayer and the parent of a group active in UK property investment, financed its business and activities with loans from a large number of lenders. In 2004, the loan arrangements were altered with the objective that the interest would not be chargeable to UK tax, ultimately so: each lender transferred its entitlement to interest (and likewise to principal) to a Guernsey-resident vehicle for consideration very shortly before the interest fell due for payment—from 2012, once assigned to the Guernsey entity, the interest was subsequently transferred again to Houmet, a UK-incorporated and UK tax-resident company just one or two days after the assignment, the interest was paid and the principal also repaid, and the same lender then made a fresh advance equal to or greater than its prior loan to the...

Beard v Revenue and Customs Commissioners [2024] UKUT 73 ( TCC) What are the practical implications of this case? On 22 March 2024, the Upper Tribunal ( Mr Justice Roth and Judge Jennifer Dean) determined that the First-tier Tax Tribunal ( Judge Rachel Short) had rightly concluded that approximately £150m of distributions paid over a continuous five-year period to Mr Alexander Beard, a UK resident, by Glencore plc—a company incorporated in Jersey and domiciled in Switzerland—were chargeable to income tax in his hands for UK tax purposes, and did not amount to ‘dividends of a capital nature’ within section 402(4) of the Income Tax ( Trading and Other Income) Act 2005 ( ITTOIA 2005). As a result, the particular planning implemented by Mr Beard, which aimed for the payments to be treated under the capital gains tax regime, did not, subject to any further appeal,...

Barclays Bank plc v HMRC [2024] UKFTT 246 ( TC) On 21 March 2024, the FTT ( Judge Tracey Bowler and Mr John Woodman) ruled that Barclays Bank plc ( BBPLC) could not claim a corporation tax deduction arising from the issue of capital-raising debt instruments to the governments of Qatar and Abu Dhabi during the 2008 financial crisis, even though its audited financial statements recorded a corresponding loss. At present, it remains as yet uncertain whether BBPLC will lodge an appeal. Nonetheless, as matters stand, the FTT’s judgment neatly illustrates the principle that, in the words of Lord Justice David Richards in Union Castle Mail Steamship Co v HMRC [2020] EWCA Civ 547, Parliament has not ‘surrendered to accountants’ the task of determining taxable profits and allowable losses arising from (in this case) loan relationships. Richards LJ...

Black Rock Holdco 5 LLC v HMRC [2024] EWCA Civ 330 The taxpayer, LLC5, was incorporated in Delaware but resident in the UK, and was established within the Black Rock group’s structure for its 2009 purchase of the Barclays Global Investor business. LLC5 issued a number of tranches of loan notes to its direct parent, LLC4, and claimed non-trading loan relationship debits for interest paid over several years. It also acquired preference shares in LLC6, which then carried out the acquisition. HMRC denied the debits claimed by LLC5 on two bases: the loans were not on terms comparable to those between independent enterprises (the transfer pricing issue); and securing a tax advantage was a main purpose of LLC5 being party to the loan relationship, with the debits attributable to that purpose (the unallowable purpose issue). The First-tier Tax Tribunal ( FTT) upheld the taxpayer’s appeal on both...

HMRC v Innovative Bites Ltd [2024] UKUT 95 ( TCC) VATA 1994, Sch 8, Group 1 sets a zero rating for VAT on food, while identifying excepted items taxed at the standard rate. Excepted Item 2 states: ‘ Confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance.’ The central question for the UT in HMRC v Innovative Bites Ltd [2024] UKUT 95 ( TCC) was whether the product came within Excepted Item 2, which required an assessment of how that provision interacts with Note 5 to the legislation. Note 5 provides that the term ‘confectionery’ in Excepted Item 2 ‘includes chocolates, sweets and biscuits; drained, glacé or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers’. This interpretive exercise framed the...

Mc Cann Media Ltd v HMRC [2024] UKUT 94 ( TCC) MML operates as the personal service company of Neil Mc Cann, a former Scottish Premiership player and Scotland international. Through MML, Mr Mc Cann delivered television punditry and co-commentary, with MML contracting with Sky TV for those services. HMRC contended the arrangements were within the scope of the intermediaries legislation and consequently issued PAYE and NIC determinations and notices spanning five years. Over that timeframe, MML’s only other undertaking was to supply Mr Mc Cann’s services for a six-week spell as Dundee FC’s interim manager, which occurred whilst the Sky agreements were still running. MML appealed the FTT’s decision, which upheld HMRC’s determinations and notices, advancing three grounds of appeal. The first asserted the FTT had erred in law in......

In this issue: Companies and corporation tax Stamp taxes VAT Individuals and income tax Taxes management and litigation Employment taxes Budget and Finance Bills Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax Court of Appeal decides interest on intra-group loans not restricted under transfer pricing rules but debits disallowed under unallowable purpose rule ( Black Rock Holdco 5, LLC v HMRC) Black Rock Holdco 5, LLC v HMRC [2024] EWCA Civ 330 considers whether, for UK tax purposes, interest on intra‑group borrowing put in place to help fund a commercial acquisition is deductible. Two principal points were before the Court of Appeal: the transfer pricing analysis and the loan relationships unallowable purpose question. On the transfer pricing limb, the Court of Appeal...

HMRC v Sehgal and another [2024] UKUT 74 ( TCC) The taxpayers were non-domiciled individuals resident in the UK who were taxed on the remittance basis. They disposed of their shareholdings in VGL to CLS, a Luxembourg-resident company. At completion, IRL—owned indirectly via a Jersey vehicle, SKS—owed £6m to a subsidiary of VGL. Under the share purchase agreement, the taxpayers agreed to indemnify that liability. Soon afterwards, it emerged the debt was irrecoverable, thereby triggering the indemnity. At the behest of CLS’s parent, a structured sequence followed: SKS purchased clothing stock from M, another company within the CLS group, for a sum mirroring the amount owed; at the same time, CLS and the taxpayers entered into a side letter confirming that this payment would reduce the outstanding debt to nil. Under these arrangements, the consideration for the clothing matched the £6m debt and, as...

WTGIL Ltd v HMRC [2024] UKUT 77 ( TCC) The taxpayer acted as the representative member of a VAT group. Among the group companies, Ingenie Services Ltd ( ISL) delivered car insurance intermediary services to young drivers under contractual terms, during which ISL incurred VAT-bearing costs connected to the installation of telematics devices in vehicles. These devices, commonly called ‘black boxes’, record how cars are driven so that insurers can use the data to adjust the premiums they charge. It was accepted by both sides that ISL’s ability to recover VAT on those costs depended on the costs being attributable to a taxable supply for consideration. Ownership of each device remained with ISL until the associated insurance policy expired or was cancelled; at that point, title to the device transferred to the policyholder. The Upper Tribunal determined that the arrangement did not give rise to a...

HMRC urges delays amid pension rule changes In a newsletter issued late on 4 April 2024, HMRC advised savers to hold off on certain payments and transfers until issues linked to rule changes are resolved. This covers situations where individuals have enhanced protection with lump sum entitlements above £375,000 ( US$472,000). The lifetime allowance — a tax break for pension savings set at just over £1m — will be removed on 6 April 2024. Chancellor of the Exchequer Jeremy Hunt set out the proposals in last month’s spring budget, leaving the tax authority and businesses with a very tight timetable. ‘ To indicate at such short notice that people should postpone taking benefits or transferring highlights how poorly these changes have been put into practice,’ said Andrew Tully, technical services director at Nucleus Financial, on 5 April 2024......

Nigel Barklem v HMRC [2024] EWHC 651 ( Ch) Film 2K incurred substantial tax losses in the 1999–2000 and 2000–2001 tax years (the Relevant Years). These were presented as trading losses and allocated among the partners in line with TMA 1970, s 12AA. For those years, the Claimant submitted self-assessment returns claiming sideways relief for his share of the partnership losses pursuant to what were then sections 380–381 ICTA 1988. To obtain such relief, ICTA 1988, s 381(4) required that Film 2K’s activities amounted to a trade conducted on a commercial footing, with profits that could reasonably be expected to be realised. HMRC opened enquiries into Film 2K’s partnership returns for each of the Relevant Years within time. It also told the Claimant that enquiring into the partnership return triggered deemed enquiries into his personal return under TMA 1970, s 28B(4). Under that...

The Prudential Assurance Company Ltd v HMRC [2024] EWCA Civ 300 The Prudential Assurance Company Ltd ( Prudential) acted as the representative member of its VAT group. Another company in the group, Silverfleet Capital Ltd ( SCL), executed an investment management services contract to provide services to Prudential. Under that contract, SCL was also eligible for a management fee and deferred performance fees once a specified hurdle rate was achieved. Under section 43 of the Value Added Tax Act 1994 ( VATA 1994), no VAT was payable on the management fee because they were in the same VAT group. In 2007, SCL exited the VAT group. In 2014 and 2015, the triggers for paying the further deferred performance fee were satisfied and SCL invoiced Prudential for over £9m in total. The question before the Court of Appeal was whether those additional...