Hargreaves Property Holdings Limited v The Commissioners for HMRC
[2024] EWCA Civ 365
Thomas William Good v The Commissioners of HM Revenue And Customs
10 February 2023
[2023] EWCA Civ 114
Court of Appeal
Mr. Good used a complicated scheme to invest in film rights. He borrowed money, and the scheme's payments covered the interest. Even though the payments went directly to the lender, the court decided Mr. Good still owed taxes because the payments helped him avoid further debt. The court said the law is clear, even if the outcome seems unfair.
Key Facts
- •Mr. Good participated in a film rights exploitation scheme designed by Scion Structured Products Ltd.
- •HMRC issued discovery assessments for unpaid income tax on 'Minimum Annual Payments' (MAPs) totaling approximately £180,000.
- •The scheme involved a loan, where MAPs were used to cover interest, and the taxpayer's initial investment generated a large initial loss, intended for sideways loss relief.
- •The taxpayer's accounts included the MAPs as income, and loss and interest payments were included as deductions.
- •The taxpayer argued he was not entitled to the MAPs due to assignment and that the MAPs weren't income from a film exploitation business.
- •The key contracts included a Loan Agreement, Distribution Agreement, Security Assignment, and Direction.
Legal Principles
Purposive interpretation of statutes, considering the overall purpose and context.
UBS AG v Revenue and Customs Commissioners [2016] UKSC 13
The phrase 'receiving or entitled to' in tax legislation should be given its ordinary meaning, and can apply to more than one person. Receipt and entitlement are distinct concepts.
Bostan Khan v HMRC [2021] EWCA 624
The existence of an assignment is not determinative of entitlement to income for tax purposes; other factors, such as benefit derived, are relevant.
Bostan Khan v HMRC [2021] EWCA 624
A person can be liable for tax on payments made to a third party if they benefit from those payments. Beneficial ownership is not the sole determining factor.
CIR v Paterson (1924) 9 TC 163, Dunmore v McGowan [1978] STC 217, Peracha v Miley [1990] STC 512
An assignment of a debt is not absolute under s. 136 of the Law of Property Act 1925 if it's conditional on repayment of a loan; only equitable assignment occurs.
Durham Bros v Robertson [1898] 1 QB 765
Outcomes
Appeal dismissed.
The taxpayer remained entitled to the MAPs despite the assignment because he derived a real benefit from their use in discharging his loan obligations. The MAPs were considered income from the film business.