TC09613 - [2025] UKFTT 00989 (TC)

The Appellant (“Mr Burley”) assigned his interest in two partnerships (“the Partnerships”) to a limited liability partnership (“LLP”) of which he was a member. Another member of that LLP was a company (Craig Burley Limited (“CBL”)), and that company was entitled to the profits of the LLP which arose because of these assignments.

Mr Burley says that the result of this transaction is that he is not liable to income tax (or, in the alternative, is only liable to income tax at the basic rate) on the profits of the Partnerships. He says this is because he is no longer entitled to those profits.

HMRC do not agree with Mr Burley, and on 9 June 2023 they issued him with five closure notices (“the Closure Notices”) charging additional amounts of income tax based on their view that his tax returns should have included the partnership profits which were the subject of the assignment. The tax years and amounts in the Closure Notices are set out below:

There are no closure notices for 2012/13 and 2013/14. Mr Waldegrave says this is for procedural reasons, and not for any reason that impacts on the issues we are considering.

Mr Burley used to be a professional footballer (Mr Cannon told us that he played for Scotland in the World Cup, although not how well Scotland fared) and, rather like a game of football, there are two halves to HMRC’s case that these arrangements did not achieve the effect Mr Burley intended. The first is their argument that the assignments were ineffective as a matter of general (non-tax) law. The second is their argument that, as the profits of the Partnerships continued to be used for Mr Burley’s benefit (to pay interest on and repay the principal of loans he had taken out to fund his investment in the Partnerships), he would still be taxable on them even if the assignments had been legally effective. Unlike a game of football, Mr Burley must win both halves.

Before dealing with those arguments, there are some preliminary points we should make. The first is that, as a result of having had Mr Burley’s rights to income from the Partnerships assigned to it, CBL has paid corporation tax which it would otherwise not have done. Whilst the detailed mechanics and quantum need to be resolved, HMRC are clear as a matter of principle that the Partnerships’ profits should not be taxed twice, in CBL’s hands and Mr Burley’s. This appeal is concerned only with Mr Burley’s tax position. The interplay of our conclusions on Mr Burley’s tax position and the corporation tax CBL has already paid has been flagged as an issue by HMRC and Mr Burley’s advisers, but it is not a matter for us.

Next, we should note that Judge Baldwin is the co-author of a textbook (Footnote: ¹) which deals in some detail with some of the issues raised in this appeal. He alerted Mr Cannon and Mr Waldegrave to this in advance of the hearing and neither took any issue with this. As (disappointingly, at least for Judge Baldwin) neither owned a copy of the book, Judge Baldwin provided them both with copies of the relevant passages, so that we all started on (or at least in possession of) the same page/s.

Finally, in their Statement of Case HMRC ran a further argument based on section 8(1B) of the Taxes Management Act 1970 and the fact that the returns submitted by the Partnerships showed Mr Burley as having a full share of partnership profits (unaffected by the assignment). HMRC criticise Mr Burley for failing to explain in the “white space” on his tax returns why he thought the partnership returns and their allocation of income to him were wrong, but the argument on section 8(1B) was not pursued before us.