The Commissioners for HMRC v Marlborough DP Limited
[2024] UKUT 98 (TCC)
Commissioners for HMRC v Marlborough DP Limited
16 April 2024
[2024] UKUT 103 (TCC)
Upper Tribunal
A company avoided tax using a complicated scheme. The tax authorities appealed, and a court found the scheme didn't work. The company argued it wasn't fairly treated, but the court disagreed, saying the company had a chance to make its case but didn't fully use it. The court's decision stayed the same.
Key Facts
- •Income tax avoidance scheme involving trust arrangements.
- •Amounts paid by Marlborough DP Limited (MDPL) under trust arrangements were questioned as taxable earnings under s62 ITEPA 2003 or Part 7A ITEPA 2003.
- •The First-tier Tribunal (FTT) decided the connection test in section 554A(1)(c) ITEPA was not met.
- •HMRC appealed the FTT decision.
- •The Upper Tribunal (UT) initially circulated a draft decision setting aside and remaking the FTT decision.
- •MDPL challenged the UT draft decision on grounds of procedural unfairness.
- •A further hearing was held to address MDPL's procedural unfairness claim.
Legal Principles
Procedural fairness requires parties to have a fair opportunity to address points on which a decision is based, especially if those points were not argued at the hearing.
Egan v Motor Services (Bath) Ltd [2007] EWCA Civ 1002, Re M (Fact-Finding Hearing: Burden of Proof) [2008] EWCA Civ 1261, Murphy v Wyatt [2011] EWCA Civ 408, Potanina v Potanin [2024] UKSC 3
Section 554A(1)(c) ITEPA requires a 'strong or direct connection' between employment/directorship and loans/rewards, not merely causation.
London Luton Hotel BPRA Property Fund LLP v HMRC [2023] EWCA Civ 362, Barclays Bank plc v HMRC [2007] STC 747
The Upper Tribunal's powers under section 12 of the Tribunals, Courts and Enforcement Act 2007 allow for setting aside and remaking or remitting a decision, but this is generally a single-stage process.
Tribunals, Courts and Enforcement Act 2007, section 12
Outcomes
The UT found no procedural unfairness.
MDPL's arguments at the original hearing covered the central issue, even if not phrased as a 'strong or direct connection' test. The UT's decision on the connection test was derived from existing case law central to the parties' arguments. MDPL failed to alert the UT to the need for further submissions at the original hearing.
The UT affirmed its original decision on the connection issue.
Even if procedural unfairness existed, the UT would not have altered its decision based on the further submissions, as they were reiterations of previous arguments.