David Milne KC, Richard Vallat KC and Calypso Blaj discuss the implications of Hargreaves, in particular:

1. What we can say about what is meant by "beneficial entitlement"?
2. How is it different to "beneficial ownership"?
3. And indeed to the trust law concept of both?
4. Is there a different international fiscal meaning of beneficial entitlement?

The panel look at where these issues may come up in practice. How definitive is the Hargreaves case? They also take a look at Altrad Services and the loss of beneficial ownership.

Discussion of Hargreaves

2:38 Whether interest payments made to a UK resident company fell within an exception to the obligation to withhold tax on payments of interest under ITA. This depends on whether the recipient is beneficially entitled to the income. The CA reviewed the case law (para 49ff of the judgment). It then applied the principles to the facts (para 61ff).

8:10 It is important that the provisions put in place were specifically to obtain a tax advantage (which was admitted). The question was whether the tax planning worked. The recipient of the interest payments was under a contractual obligation to pay on the money it received so was it the beneficial owner therefore? The judgment gives guidance as to the domestic meaning of beneficial entitlement.

11:39 What of the rival definition of "beneficially entitled", also known as the international or fiscal meaning? Should this be adopted in a withholding tax situation? Discussion of Indofood and the ECJ cases in 2019. The international, fiscal meaning has to take into account the objects and purposes of the Convention including avoiding double taxation. This differs from the domestic law requirements per Ramsay of whether the concept fits within the statutory purpose and context of the provisions.

17:05 Conduit arrangements (insertion of a company) caught under either definition. However, theoretically there may be other cases where you are treated as being beneficially entitled under say the international, fiscal meaning but not under the domestic meaning.

18:35 The domestic meaning should not be dependent on finding a tax avoidance motive.

Losing beneficial ownership

20:00 Altrad Services/Wiseman. Turned on "ceasing to own" in s61 Capital Allowance Act. Marketed tax avoidance scheme. Application of Ramsay purposive principle. See Tax Journal article on Altrad in July 2024. Case quite an extreme example so there might be other cases which are less clear cut.

28:07 NB there does not have to be someone who has beneficial ownership.

Areas where beneficial ownership comes up

28:47 Withholding tax on interest payments, double tax treaties (dividends and royalties), domestic group relief provisions (eg CGT, substantial shareholding exemption, SDLT).

Other comments

30:52 What if the conduit company in Hargreaves had actually used some/all of the money even for a short period? Or had another reason for existing other than being a conduit?

31:54 What if in Altrad, the complex arrangements designed to take advantage of capital allowances had actually been subject to a contract...

In this episode, Elizabeth Wilson KC and Ronan Magee take a look at the "unallowable purpose rule" in the loan relationship code and in particular three recent Court of Appeal cases – Kwik-Fit (in which Elizabeth Wilson KC and Ronan Magee acted), BlackRock and JTI Acquisitions (in which Elizabeth Wilson KC acted).

• (2:28) outline of the unallowable purpose rule. It involves a multi-layered test.
• (4:45) a key element is what, as a matter of fact, is the group's purpose in organising the borrowing. You decide this by looking at all the facts therefore. Discussion of this in relation to the JTI Acquisitions case, Kwik-Fit and BlackRock.
• (9:48) companies have been trying to narrow what the courts can consider when applying the test. The Court of Appeal has clearly shown this cannot be done.
• (11:52) JTI Acquisitions underlines that a company must prove its case on all the facts. It cannot be selective.
• (13:50) Do you need to be coming to the UK for other reasons, not just tax reasons, in order to benefit from the rule?
• (16:00) Syngenta: there must be proper evidence and not window dressing/assertions. What role do documents and witness evidence have in establishing facts? Importance of getting all your evidence (documentary and witness) before the tribunal.
• (22:45) Kwik-Fit: genuine commercial losses in one part of the group which they sought to set against profits in other parts of the group. The disallowed losses were, however, capped which shows the attribution rule in its safeguarding role.
• (29:01) new loan relationship code anti-avoidance provision ss445B - D.
• (30:47) some questions are not yet answered (eg attribution).

Cases/legislation

Cases

Kwik-Fit [2024] EWCA Civ 434

Blackrock [2024] EWCA Civ 330

JTI Acquisitions [2024] EWCA Civ 652

Fidex [2016] EWCA Civ 385

Travel Documents Service [2018] EWCA Civ 549

Syngenta [2024] UKFTT 998 (TC)

Gestmin [2013] EWHC 3560 (Comm)

Kogan v Martin [2019] EWCA Civ 1645

Euromoney [2022] UKUT 205 (TCC)

Legislation

ss441 and 442 Corporation Tax Act 2009

s1139 Corporation Tax Act 2010

ss445B - D Corporation Tax Act 2009

The October 2024 budget proposes a number of very significant changes for those who were previously considered “non-domiciled” for tax purposes, with effect from 6th April 2025.

James Rivett KC and Emma Chamberlain are private client tax specialists who act for both clients and HMRC. They take a balanced look at some of the fundamental features of the proposals highlighting some of the main features, explaining what the new rules will do, what they don’t do, how they will/may work, who is affected and what one should be thinking of doing now if you are or are advising someone previously treated as a “non dom”:

• (2.07) Rewrite of the relevance of domicile.
• (2.36) The background to the proposed changes and what we can expect in the months to come, including HRMC’s technical note of 30th October 2024.
• (6.37) The new regime for “qualifying new residents” – part of the abolition of the remittance basis. They identify some of the potential difficulties such as the fact you cannot claim later and also the matching rules are affected.
• (11.45) Transitional reliefs.
• (26.09) Why the remittance basis is still relevant.
• (30.22) Changes to Inheritance Tax for both individuals (30.22) and trusts (36.18).
• (41.40) Transitional provisions including discussion of the relevant property regime and new exit chanrges (45.40), funding the new charges (49.55) and double tax treaties (51).
• (54) Should you consider leaving the UK?
• (57.57) Should you consider coming to the UK?

Addendum: If you are foreign domiciled and deemed domiciled but leave by April 2025 only a 3 year tail applies; if you are foreign domiciled and not deemed domiciled but have been here for more than 10 years no three year tail applies if you leave by April 2025.

Useful links

HMRC’s technical note of 30th October 2024:Reforming_the_taxation_of_non-UK_individuals.pdf

“Trust Taxation & Estate Planning” – Chamberlain & Whitehouse (Sweet & Maxwell) 5th edition 2024

Legislation

Acts referred to

Inheritance Tax Act 1984

Taxation of Chargeable Gains Act 1992

Taxation (International & Other Provisions) Act 2010

Taxes Management Act 1970

Income Taxes Act 2007

Finance Bill – 7th November 2024 – schedule 9: Finance Bill publications - Parliamentary Bills - UK Parliament

Particular clauses referred to

Section 809L ITA 2007

Section 809P(12) ITA 2007

IHTA S49(1) taking precedence over s48(3)

FA 1986 Section 102(4)

Cases

Sehgal v HMRC [2024] UKUT 00074

Addendum:

If you are foreign domiciled and deemed domiciled but leave by April 2025 only a 3 year tail applies; if you are foreign domiciled and not deemed domiciled but have been here for more than 10 years no three year tail applies if you leave by April 2025

Now the dust has settled following publication of the 30th October 2024 budget, Kevin Prosser KC and David Yates KC give their thoughts on certain aspects of the budget, looking at important changes to CGT and IHT, and against the backdrop of the GAAR (general anti-abuse rule).

Kevin and David's discussion covers:

Capital Gains Tax (from 2.17 minutes)

• new anti-forestalling provisions
• unconditional contract planning and the use of overseas entities
• investors' relief in respect of gains on sale of shares in listed companies
• pilot trusts
• the consequences of the transfer of assets when limited liability partnerships become body corporates (s59A and s59AA TCGA)
• employee ownership trusts (ss236H - P of TCGA 1992)

Inheritance Tax (from 25.21 minutes)

• employee benefit trusts
• Post 6 April 2026 tax planning (partnerships, reorganising share capital) now APR and BPR has been reduced
• actual domicile/domicile of choice

The implications of the budget on "non doms" will be discussed by James Rivett KC and Emma Chamberlain in a separate podcast.

Cases and legislation referred to

WT Ramsay Ltd v IRC [1982] 2 AC 300

Rysaffe v IRC [2003] EWCA Civ 356

Barker v Baxendale Walker [2017] EWCA Civ 2056

Finance Act 2020

Finance Bill 2024

Inheritance Tax Act 1984 (in particular ss 13, 28, 86)

Taxation of Chargeable Gains Act 1992 (in particular ss17,18, 28, 59A, 59AA, 236H - P)

Keep up to date with all things tax law related with the Pump Tax Chat, brought to you by leading UK tax set, Pump Court Tax Chambers. In our latest episode, Laura Poots and Ben Elliott discuss the latest case law developments in HMRC’s powers of assessment, for both direct and indirect tax. They cover issues of carelessness, deliberate behaviour and protective assessments.

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