Tax analysis: In Putney Power Ltd and another v HMRC, the First-tier Tax Tribunal (FTT) dismissed appeals against HMRC’s decisions that the shares issued by each of the companies were not eligible shares for the purposes of the Enterprise Investment Scheme (EIS). The FTT held that the companies had not begun to carry on a qualifying trade within the required time limit in section 179 of the Income Tax Act 2007.

Tax analysis: In Janet Bray Ltd v HMRC, the First-tier Tax Tribunal (FTT) upheld PAYE determinations and penalties issued on the basis that the taxpayer company had been careless in implementing an employee loan scheme that it accepted did not work.

Tax analysis: In Madsen v HMRC, the First-tier Tax Tribunal (FTT) allowed the taxpayer’s appeal against a discovery assessment charging stamp duty land tax (SDLT) on the purchase of a residential property. Although the scheme the taxpayer used to avoid SDLT was ineffective, HMRC’s assessment was invalid.

Tax analysis: In The Boston Consulting Group UK LLP and others, the First-tier Tax Tribunal (FTT) found that payments made to individual members of a UK LLP on ‘sales’ of their ‘Capital Interests’ were taxable as income under the miscellaneous category in section 687 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005). Despite this conclusion, however, several of the individuals’ appeals against HMRC’s discovery assessments were allowed as HMRC failed to show that errors in their returns were brought about carelessly or that the hypothetical officer test had been met.

Tax analysis: In Isle of Wight NHS Trust and others, the First-tier Tax Tribunal (FTT) held that based on the facts of the case, a reply from HMRC in response to correspondence regarding the VAT liability of certain supplies was an appealable decision under section 83(1)(b) of the Value Added Tax Act 1994 (VATA 1994).

Tax analysis: In Vaccine Research Ltd Partnership, the First-tier Tax Tribunal (FTT) allowed the taxpayers’ appeals, finding that licence fees received as part of a complex scheme intended to generate income tax losses were not income and so not subject to income tax.

Tax analysis: In Brzezicki, the First-tier Tax Tribunal (FTT) held that stamp duty land tax (SDLT) on the purchase of a six-acre property was chargeable at the rates for mixed-use property rather than at the residential rates. The decision is an unusual one in which the non-judicial member of the FTT issued a dissenting decision, indicating that he would have found the entire property to be residential.

Tax analysis: In A D Bly Groundworks and Civil Engineering Ltd and CHR Travel Ltd v HMRC, the First-tier Tribunal (FTT) (Tax) held that the taxpayers were not entitled to a deduction in computing their trading profits for provisions in respect of their liability to make future payments to employees under an unfunded unapproved retirement benefit scheme (UURBS).

In Barclays Service Corporation and another v HMRC, the First-tier Tax Tribunal (FTT) held that an overseas service company was not entitled to join a UK VAT group because it did not have a UK fixed establishment at the time group membership was applied for.

Private Client Analysis: The First-tier Tribunal held that a series of political donations constituted chargeable transfers for inheritance tax purposes, rejecting reliance on both sections 10 and 21 of the Inheritance Tax Act 1984 (IHTA 1984). Applying Parry v HMRC, the Tribunal found that the donations conferred a gratuitous benefit both objectively and subjectively, notwithstanding the taxpayer’s intention to gain political influence. It further held that the payments did not form part of ’normal expenditure out of income‘, as there was no settled pattern, formula, or sufficient regularity. The decision clarifies the strict approach to gratuitous intent and emphasises that variability in amount and timing will undermine claims to the IHTA 1984, s 21 exemption, limiting its scope in practice. Produced in partnership with Alice Defriend of Devereux Chambers. Written by Alice Defriend, barrister at Devereux Chambers.

Tax analysis: In Wilkinson and others, the First-tier Tax Tribunal (FTT) held that a share for share exchange did not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, was the avoidance of a liability to capital gains tax. Accordingly, the share for share provisions in section 135 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) applied to the transaction and were not disapplied by TCGA 1992, s 137.

Tax analysis: In Clearwater Hampers, the First-tier Tax Tribunal (FTT) found that lidded wicker baskets were ancillary to the principal supply of the food and drink items contained within them. It noted (a) that a container that is capable of being used again is not necessarily a separate supply (a jam jar is capable of being used again after its contents have been consumed), (b) the supplier did not provide its customers with a choice regarding which type of container each of its gift products was supplied in, (c) the gift products were items of food and drink in an attractive and secure packaging—the packaging did not constitute an aim in itself, and (d) each lidded wicker basket served the dual purpose of protecting the items within it and presenting those items in a way that was appropriate to the price of the items.