TC09557 - [2025] UKFTT 00750 (TC)

On the question of whether the transfer of value by the Company was attributable to a payment or transfer of assets to Ms Tonkin which fell to be taken into account in computing Ms Tonkin’s profits or gains for the purposes of income tax, we again prefer the submissions of Mr Sykes.

It was HMRC’s case that the Company had made a transfer of value, for inheritance tax purposes, of £740,100. We note that Ms Tonkin did not accept that there was a transfer of value, and her grounds of appeal and skeleton argument make a number of submissions in support of this position. However, by the time of the hearing Ms Tonkin no longer wished to pursue the argument that there was no transfer of value. As the burden is on Ms Tonkin to show that HMRC’s notice of determination is incorrect, we therefore accept that the Company made a transfer of value of £740,100.

Under the scheme, the Company transferred £740,000 to IES as its agent. It also transferred £100 to the Trust, which in turn transferred the £100 to IES. IES used the £740,100 to buy gold, which it held as nominee for Ms Tonkin. It immediately sold the gold and then held the cash proceeds, again as nominee for Ms Tonkin. It is, to our minds, clear that this means that there was a “payment or transfer of assets” to Ms Tonkin, and that the transfer of value by the Company was “attributable” to that payment or transfer.

We accept that the Trust also received value as a result of the scheme transactions. It received £100 from the Company (albeit that it immediately paid this amount to IES), and it received Ms Tonkin’s promise to pay £740,100 in ten years’ time. We do not, however, consider that it follows from this that the transfer of value cannot be viewed as attributable to the payment to Ms Tonkin. The payment to Ms Tonkin was one step in a scheme that involved a number of transactions, but the transfer by the Company was very directly connected to the payment to Ms Tolkin. The brief involvement of IES as agent and nominee, and the purchase and immediate sale of the gold, were the only intermediate steps between the money leaving the Company and becoming beneficially owned by Ms Tonkin.

We have considered why the Company’s transfer of value should be regarded as attributable to the payment to Ms Tonkin and not, as HMRC argue, to what was received by the Trust. We think there are two answers to this. The first is that these positions are not mutually exclusive: we see nothing in the wording of the statute to indicate that the transfer by the Company could not be regarded as attributable both to the payment to Ms Tonkin, and to what was received by the Trust.

The second answer follows from HMRC’s submission, which we accept, that we should view the transactions realistically. We find from the evidence, including the minutes of the meeting on 20 April 2012, the minutes of the meeting at 2.30pm on 23 November 2012, and Ms Tonkin’s witness statement and oral evidence, that the Company’s intention in implementing the scheme was to provide Ms Tonkin with a bonus. The transfer to Ms Tonkin had real and lasting consequences for her, in that once the transactions had been implemented, the Company owed her £740,000, which was credited to her director’s loan account.

HMRC’s position is that viewed realistically, the transfer of value was from the Company to the Trustee. We note that what the Trustee received under the transactions was a promise by Ms Tonkin to pay £740,100 in ten years’ time, and that more than 12 years later this payment has not been made, nor has the Trustee taken any steps to recover this debt. On this basis we do not accept that it is more realistic to view the transfer of value from the Company as having been made to the Trustee rather than to Ms Tonkin.

HMRC are also in the uncomfortable position of taking a different position in relation to inheritance tax from that which they took for income tax, as set out in their letter of 29 June 2017. This states that “HMRC’s primary position is that the Scheme results in payment of earnings to the employees from the employer in the form of either money or money’s worth, in the form of gold”.

We accept that the income tax code is different from the inheritance tax code. However, HMRC are not submitting that the detailed statutory provisions for each tax result in different outcomes. As we understand HMRC’s submissions (as articulated in this appeal in relation to inheritance tax, and in their letter of 29 June 2017 in relation to income tax), their position appears to be that there are different realistic views of the transactions depending on which tax is in point. We see no basis for this position, and consider that the realistic view applied by HMRC for the purposes of income tax also applies for the purposes of inheritance tax.