Legal News

Good v Revenue and Customs Commissioners [2023] EWCA Civ 114 What are the practical implications of this case? This decision offers clear, practical direction on how the phrase ‘entitled to’ should be understood across income tax provisions, and on the purposive reading of those rules, making it of broad relevance to all tax advisers. It affirms that the authorities recognise a wider principle: subject to the wording of the statute and the context of the payments, an individual can be charged to tax on sums paid to another if that individual derives a benefit from those sums. That conclusion is unaffected by an irrevocable assignment of the payments. It did not matter that the parties never intended the rights to return to Mr Good; it was enough that, as a matter of contract, they could have done so. The case also sheds further light on...

Thomas William Good v HMRC [2023] EWCA Civ 114 The taxpayer took part in a tax avoidance arrangement. Using a mixture of his own funds and borrowed capital from a lender, he acquired film distribution rights and, under a ‘distribution agreement’, assigned them in exchange for a continuing share of the films’ profits together with minimum annual payments ( MAPs) expressly set to enable him to service his loan obligations and liabilities. As security, he transferred the benefit of, and granted a charge over, the MAPs to the lender. The MAPs were to be paid directly to the lender, to be applied to interest and repayment of the borrowing as they fell due each period. It was envisaged that the arrangement would generate a tax loss for sideways relief (although it was ultimately accepted this was unavailable because he was not carrying on a trade) and that...

Isle of Wight NHS Trust and others v HMRC [2023] UKFTT 23 The dispute originates in correspondence about the proper VAT treatment of supplies of locum doctors to NHS hospitals. Acting for multiple NHS Trusts, the appellants’ representative (a VAT adviser) sent HMRC a technical paper on the VAT position for locum doctors. The adviser explained that formal claims would follow within weeks, and included illustrative figures to indicate the likely scale. That correspondence set the context for the dispute, as the adviser’s letter trailed the intended claims while providing worked examples to illustrate quantum. The submission contested HMRC’s stated position and contended that an earlier tribunal decision on the same issue had been wrongly reached. HMRC replied at length, upholding its policy as correct. After receiving HMRC’s detailed response, which affirmed the existing position, the adviser treated that reply as a...

Mainpay Ltd v HMRC [2023] UKFTT 16 ( TC) The appellant operated as an umbrella company, delivering standard admin and PAYE functions for contingent staff it hired and supplied, through multiple recruitment agencies, to ultimate clients across hospitals and schools. Those workers were engaged by it and supplied, via agencies, on assignments to clients. It maintained that, because workers were engaged under a continuing, overarching contract (that is, a single employment), each location where assignments were performed qualified as a temporary workplace, so travel and subsistence could be deducted from earnings for tax. It further contended that, given the brevity of each posting, individuals were not attending any site 'regularly', and therefore no workplace was permanent. HMRC’s position was that every assignment constituted a 'separate employment', entailing attendance at a permanent workplace, and it raised determinations on that basis. The key...

Harris v HMRC [2022] UKFTT 447 ( TC) The appeal related to a tax charge of around £900,000 set out in a partial closure notice issued by HMRC. The appeal was placed in the complex category, and the taxpayer did not opt out of the costs regime. The FTT characterised the litigation as ‘ill‑tempered’, but in due course HMRC informed the FTT that they would no longer contest the appeal, whereupon the FTT allowed it. The taxpayer subsequently sought costs of more than £350,000, to be assessed on the indemnity basis. HMRC at first applied to have that application struck out on procedural grounds, but the FTT refused this,......

Withers v HMRC [2022] UKFTT 433 ( TC) The landholding comprised a dwelling with a self-contained annexe and gardens and grounds of circa 10 acres, together with a further circa 20 acres. Part of the additional land was used for grazing, and part was entered into a rewilding scheme. The grazing area had been used in that way continuously for 20 years, although a formal written grazing agreement—which did curtail the taxpayer’s use of the land in certain respects—was only adopted in 2019. Pursuant to that agreement, a local farmer grazed his sheep on the land in return for a nominal rent and the farmer’s ongoing upkeep of the land. The rewilding land was subject to stringent conditions limiting the taxpayer’s access and use, and imposed duties on the taxpayer to control pests and to refrain from grazing livestock on the specified land. In both...

TP ICAP Ltd v NEX Group Ltd [2022] EWHC 2700 ( Comm) The claims for breach of warranty stemmed from two probes: one by the US Commodities Futures Trading Commission concerning swaps trading linked to bond issuances and another by a Frankfurt public prosecutor targeting a named director of a group entity in relation to cum-ex trading during the relevant period. In essence, the alleged breaches concerned warranties addressing the following: that no group company, officer, or employee had been the subject of any non-routine investigation of any kind by a ‘ Governmental Authority’ within the prior 18 months; and that no circumstances existed which could reasonably be expected to result in litigation against a group company where the amount in dispute exceeds £500,000. Those warranties were, in places, qualified by a seller-awareness threshold (here defined as the actual knowledge, after...

The repeal of 2017 and 2021 reforms from April 2023 has been announced by the UK government as part of the Growth Plan 2022 presented by the Chancellor of the Exchequer in his ’mini budget’ statement to Parliament. This move follows the new Prime Minister’s pledge to review IR35 and forms part of a broader drive to boost economic growth by trimming regulation and cutting taxes. The plan indicates the change will reduce Treasury tax receipts by £1–2bn per year. At first glance, many hirers and suppliers of contract workers are likely to welcome the shift, seeing a chance to revert to more tax‑efficient engagement through personal service company ( PSC) arrangements. Under the current rules, however, clients and suppliers can be on the hook if a PSC worker is, in reality, not truly self‑employed—an assessment that is notoriously...

Edward Cumming Bruce v Revenue and Customs [2022] UKUT 233 ( TCC) Following the Court of Appeal’s decision in Mansworth v Jelley [2002] EWCA Civ 1829, together with an associated HMRC press release in January 2003, the taxpayer sought to claim capital losses by making in-time amendments to previously submitted tax returns. He wrote to HMRC enclosing revised computations of losses realised on the disposal of shares acquired under an adjustable share option scheme, together with detailed changes to the capital gains tax ( CGT) calculation pages in the relevant returns. HMRC opened enquiries into the relevant returns pursuant to TMA 1970, s 9A, and later closed those enquiries on the footing that the asserted losses were not allowable. The question on appeal focused on whether the taxpayer’s notifications of capital losses were free-standing claims or whether they formed part of his tax...

Altrad Services Ltd and Robert Wiseman and Sons Ltd v HMRC [2022] UKUT 185 ( TCC) The taxpayers (referred to as Cape and Wiseman before the FTT) implemented schemes intended to ‘step up’ the capital allowances available to them on assets they already held. Put simply, they transferred the assets to a bank, the bank leased them back to the taxpayers for a brief period of three or four weeks, and afterwards the bank transferred the assets back to the taxpayers by way of a sale. Relying on a quirk in the statutory rules (later rectified by the Finance Act 2011), the taxpayers argued that, for capital allowances purposes, they were not required to recognise any disposal value on that first sale of the assets, but......

Exchequer Solutions Ltd v HMRC [2022] UKFTT ( TC) 181 Exchange Solutions Ltd ( ESL) operated as an umbrella company, employing individual workers under an overarching—or ‘umbrella’—employment contract and making their services available to agencies, which then placed them with construction industry contractors. The core question was whether ESL’s workers were engaged continuously under a single, overarching employment contract spanning all assignments, or instead whether each assignment was governed by its own agreement. At its heart, the dispute turned on the contractual structure for the workers’ engagements. That distinction was critical. With an overarching contract, every location would count as a temporary workplace and travel costs could be reimbursed free of tax. By contrast, if each job sat under a separate contract, each site would be a permanent workplace and PAYE and National Insurance contributions......

The Tower One St George Wharf Ltd v HMRC [2022] UKFTT 154 ( TC) A corporate group was progressing a site for residential use as a development project. The concluding phase involved a 50‑storey tower, which they planned to place into a special purpose vehicle ( SPV) to ring‑fence exposure to risk and potential liabilities, and to secure greater financial flexibility for the project as a whole. After consulting their tax advisers, the group executed a sequence of transactions on the very same day intended to step up the tax cost of the scheme, so the SPV would be treated as acquiring it at market value, with no tax liabilities arising along the chain overall. In outline, the company that owned the property granted a 999‑year lease to another group entity, B64. The shares in B64 were then purchased by......

Beard v HMRC [2022] UKFTT 129 ( TC) This appeal addresses the proper UK tax treatment of distributions made by a Jersey company from its share premium account. The company was a publicly listed limited company incorporated in Jersey, domiciled in Switzerland, and with its head office also in Switzerland. It was not resident in the UK for tax purposes. HMRC issued a closure notice assessing the appellant, Mr Beard, to income tax on a series of such distributions he received from the company over a number of years. Mr Beard appealed, arguing that the payments were capital in nature and therefore fell outside the UK charge to income tax. The FTT had to determine whether the distributions were to be treated as dividends for the purposes of section 402 of the Income Tax ( Trading and ......

HMRC v AML Tax ( UK) Ltd UKUT 81 ( TC) The company formed part of a loosely associated Isle of Man group and operated in connection with tax avoidance arrangements used by UK contractors and sub-contractors. The exact scope of what it did was uncertain, but it encompassed promoting the group’s avoidance offerings and devising and delivering at least one arrangement. HMRC opened enquiries into the company’s 2014 and 2015 returns and, in February 2018, served an information notice. The company provided no compliance at all until December 2019, and some of the requested material was still outstanding until August 2021. After issuing fixed and daily penalties, HMRC applied to the UT for a penalty under FA 2008, Sch 36, para 50......

Hargreaves v HMRC [2022] UKUT 34 ( TCC) Although the taxpayer, Mr Hargreaves, had persuaded the FTT to set aside the discovery assessments by relying on staleness, the Supreme Court’s ruling in Tooth [2021] UKSC 17 effectively removed staleness as a viable concept. In consequence, HMRC’s appeal on that ground was bound to succeed, and the taxpayer did not seek to argue otherwise. As a safeguard, in case it were mistaken on staleness, the FTT also examined further points and stated it would have found for HMRC on those too. Mr Hargreaves appealed those alternative conclusions to the UT, but that appeal did not succeed. The dispute arose because Mr Hargreaves filed a self-assessment tax return on the footing that he was not resident in the UK for the year concerned. HMRC took the view that this was wrong and raised an...

Hyman and another v HMRC [2022] EWCA Civ 185 Under section 116 of the Finance Act 2003 ( FA 2003), any land which is, or comprises part of, the gardens and grounds of a dwelling is regarded as being residential property and is charged to SDLT at the residential rates. The taxpayers were seeking to argue that land acquired with a dwelling did not constitute part of that property’s garden or grounds, so that buying the dwelling together with the land should be classed as mixed-use property (and benefit from the lower non-residential SDLT rates). They further maintained that land can qualify as garden or grounds of a dwelling only where the land is required for the reasonable enjoyment of the......

A D Bly Groundworks and Civil Engineering Ltd and CHR Travel Ltd v HMRC [2021] UKFTT 445 ( TC) Both taxpayers used the same firm of chartered accountants to set up a UURBS, under which they undertook to provide directors and certain key employees with a pension at a later date. The taxpayers recorded provisions in their accounts for their liability to make those pension payments in future, thereby recognising expected obligations to be settled in due course as and when those benefits fell due. For each relevant period, the provisions were set at between 80% and 100% of profits before tax, respectively. The UURBS was notified to HMRC under the disclosure of tax avoidance scheme provisions. The only issue for the FTT was whether the provisions were allowable deductions. It determined that the provision of......

Ladson Preston Ltd and AKA Developments Greenfield Ltd v HMRC [2021] UKFTT 251 ( TC) Both Ladson Preston Ltd ( Ladson) and AKA Developments Greenfield Ltd ( AKA) purchased property benefiting from planning permission for multiple residential units. As at the effective date of each transaction, no dwelling had yet been erected. The taxpayers contended that the presence of that consent was enough to satisfy the statutory wording of paragraph 7(2)(b) of Schedule 6B to the Finance Act 2003 ( FA 2003). Under that provision, a building qualifies as a dwelling for the purposes of multiple dwellings relief ( MDR) if it is in the course of construction or is being adapted for such occupation. AKA had additionally carried out early-stage site works and argued that those operations—specifically the drilling of boreholes—meant the dwellings were already in the process of being built. The cases...

Re Hut Group Ltd; Zedra Trust Company ( Jersey) Ltd v The Hut Group Ltd [2021] EWCA Civ 904 What are the practical implications of this case? The Court of Appeal, in this decision, reaffirmed two central principles. First, when evaluating whether directors’ conduct, representing breaches of their fiduciary and statutory obligations to the company, amounts to conduct that is unfairly prejudicial to the petitioner, the critical enquiry is not to whom those duties are owed, but whether the complained‑of conduct unfairly prejudiced the petitioner in his capacity as a shareholder; if so, it is conduct capable of establishing unfair prejudice. Second, allegations of bad faith akin to fraud must be supported by the proper pleading of credible, cogent primary facts that sustain those allegations, either expressly or by reasonable inference drawn from them. Bare assertions or generalised averments of bad faith, advanced without pleaded...

What is land pooling and what is this type of structure used for? Put simply, land pooling is where a number of landowners collaborate to promote their land for development and to divide both the promotion costs and the sale proceeds. The objectives are two-fold: to encourage co-operation between owners to bring a site forward for development to secure an equitable split of costs and returns The principal tax consideration is capital gains. Imagine landowners A and B each own 50 acres and agree to share expenses and sale proceeds on a 50/50 basis. If A sells first, he pays capital gains tax (or corporation tax if a company). A then pays 50% of his net proceeds to B as an ‘equalisation payment’. That payment is not deductible in computing A’s capital gains tax ( CGT) position. To prevent...