CA-2024-001410 - [2025] EWCA Civ 1443

Lady Justice Falk:

Introduction

This is an appeal by two taxpayers, A D Bly Groundworks and Civil Engineering Limited (“A D Bly”) and CHR Travel Limited (“CHR”), against a decision of the Upper Tribunal (“UT”) dismissing their appeal against a decision of the First-tier Tribunal (“FTT”). The FTT had rejected challenges by A D Bly and CHR to closure notices which denied deductions for provisions in their accounts in respect of pensions.

The dispute concerns arrangements entered into by A D Bly and CHR on the advice of their accountants, Charterhouse (Accountants) Limited (“Charterhouse”). The arrangements took the form of an Unfunded Unapproved Retirement Benefit Scheme (“UURBS”). The UURBS comprised contractual commitments entered into with directors and other key employees under which A D Bly and CHR made unfunded promises to provide those individuals with future pensions. They made provision for the liabilities they had taken on in their accounts and calculated their profits for corporation tax purposes on the same basis. The closure notices amended their tax returns to treat the provisions as non-deductible.

The arrangements were marketed by Charterhouse to a number of its clients and were notified to HMRC in accordance with the Disclosure of Tax Avoidance Schemes (or “DOTAS”) legislation in Part 7 of the Finance Act 2004 (“FA 2004”). HMRC’s challenges to the arrangements have led to a number of appeals to the FTT by clients of Charterhouse. The appeals brought by A D Bly and CHR have been designated as “lead cases” under the FTT’s rules.

HMRC’s primary contention is that the amounts in question were liabilities incurred for the purpose of a tax avoidance scheme rather than expenses incurred wholly and exclusively for the purposes of the trade, such that deductions should be denied under s.54 of the Corporation Tax Act 2009 (“CTA 2009”). HMRC’s alternative argument, maintained by way of Respondent’s Notice in this court, was that the deduction sought was in respect of “employee benefit contributions” and should be disallowed under s.1290 CTA 2009. HMRC’s first argument was accepted by the FTT so the alternative argument did not strictly arise for decision, but it was briefly considered and rejected. The UT endorsed the FTT’s decision on the wholly and exclusively issue but also dealt in more detail with the argument on s.1290, on which it reached the same conclusion as the FTT, namely that s.1290 did not apply.

I have concluded that the UT made no error and that the appeal should therefore be dismissed.