TC09557 - [2025] UKFTT 00750 (TC)

At the time IHTA 1984 was enacted, the Income and Corporation Taxes Act 1970 (“ICTA 1970”) contained and represented the basic statutory code for levying income tax and corporation tax. Section 1 of that Act was as follows (emphasis added):

“The charge

Where any Act enacts that income tax shall be charged for any year at any rates, then, subject to the provisions of the Income Tax Acts, the tax at those rates shall be charged for that year in respect of all property, profits or gains respectively described or comprised in the Schedules contained in the following sections of this Act—

Schedule A—Section 67(1),

Schedule B—Section 91,

Schedule C—Section 93,

Schedule D—Section 108,

Schedule E—Section 181(1), and

Schedule F—Section 232(1),

and in accordance with the provisions of the Income Tax Acts respectively applicable to those Schedules.”

It is clear that “profits or gains” include the amounts taxed under Schedule E (the schedule dealing with employment income).

ICTA 1970, s 181 charged “emoluments” from the employment. “Emoluments” were defined under s 183(1) as including “all salaries, fees, wages, perquisites and profits whatsoever”.

There can be little doubt that until the introduction of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA 2003”), IHTA 1984, s 94(2)(a) provided an exemption from apportionment to the extent that a transfer of value was attributable to a payment or transfer of assets which fell to be taken into account in computing a person’s income for income tax purposes, and that this included employment income.

The “profits or gains” wording is not replicated in ITEPA 2003. However, ITEPA 2003, s 62(2) still defines earnings as including “any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money's worth”.

It would be astonishing if the effect of enacting ITEPA 2003 was to narrow the scope of IHTA 1984, s 94(2)(a) and this cannot have been the intent in the absence of clear words. In this context Mr Sykes cited Ye Olde Cheshire Cheese Ltd v Daily Telegraph plc [1988] 1 WLR 1173 and R v OB [2012] 1 WLR 3188.

The term “profits or gains” in s 94(2)(a) is not limited to trading profits or chargeable gains since this is not what the legislation states. Exempt dividend income is specifically included within s 94(2)(a), clearly indicating that “profits or gains” means income taxable under the income tax code or corporation tax code.

The ordinary meaning of “profit or gains” is apt to include even a single receipt.