Chris Hoyle v The Commissioners for HMRC
[2024] UKFTT 1060 (TC)
GCH Corporation Ltd & Ors v The Commissioners for HMRC
17 October 2024
[2024] UKFTT 922 (TC)
First-tier Tribunal
A family-run LLP invested in shares. The tax man said they owed extra tax on a loan they received. The court decided the LLP was a genuine business, so the loan wasn't taxable. Even though the tax man's method of assessing the tax was correct, it didn't matter because there was no tax owed in the first place.
Key Facts
- •GCH Active LLP (LLP) was incorporated to acquire, hold, and sell shares with a view to profit.
- •The LLP was initially funded by Gregory Hutchings, the trustee of three family settlements.
- •The LLP purchased and sold shares, making a profit before its liquidation.
- •The LLP received Loan Notes from the sale of Tomkins PLC shares held by GCH Corporation Ltd and the family settlements.
- •HMRC issued closure notices and discovery assessments alleging tax due from the LLP, GCH Corporation Ltd, and the family settlements on the transfer of the Loan Notes to the LLP.
- •The appeal challenged the validity of the assessments on the basis that the LLP satisfied the conditions of s.59A(1) TCGA 1992, making it tax transparent.
Legal Principles
Whether a limited liability partnership (LLP) carries on "a trade or business with a view to profit" for the purposes of s 59A(1) TCGA 1992.
Taxation of Chargeable Gains Act 1992, s.59A(1)
Definition of "trade" and "business" in the context of s. 59A(1) TCGA 1992.
Case law: Ransom v Higgs [1974] 1 WLR 1594; Ingenious Games LLP and others v HMRC [2021] EWCA Civ 1180; Marson v Morton [1986] 1 WLR 1343; Eclipse Film Partners No. 35 LLP v HMRC [2015] EWCA Civ 95; GE Financial Investments v HMRC [2023] UKUT 00146; American Leaf Blending Co Sdn Bhd v Director-General of Inland Revenue [179] AC 67; Town Investments Ltd v Department of the Environment [1978]; Jowett v O’Neill and Brennan Construction [1988] STC 482; Revenue and Customs Commissioners v Salaried Person Postal Loans [2006] EWHC 763 (Ch); Customs and Excise Commissioners v Lord Fisher [1981] STC 238; Elisabeth Moyne Ramsay v HMRC [2013] UKUT 0226 (TCC); Inland Revenue Commissioners v The Korean Syndicate Ltd [1921] 3 KB 258; Commissioners of Inland Revenue v The Tyre Investment Trust Ltd [1924] 12 TC 646; Westleigh Estates Company Ltd and South Behar Railway Company Ltd [1925] AC 476
"Badges of trade" used to determine if an activity is trading.
Marson v Morton [1986] 1 WLR 1343
Application of the principle in WT Ramsay Ltd v IRC [1981] STC 174 in determining the purpose of a transaction.
WT Ramsay Ltd v IRC [1981] STC 174; Collector of Stamp Revenue v Arrowtown Assets Ltd (2003) 6 ITLR 454
Validity of discovery assessments under s.29 TMA 1970.
Taxes Management Act 1970, s.29
Outcomes
Appeal allowed.
The LLP satisfied the requirements of s.59A(1) TCGA 1992 at the time the Loan Notes were transferred to it, meaning the transfers were capital contributions, not disposals. Therefore, no additional tax was due.