[2025] UKUT 264 (LC)

Even so, the appellant argues that the FTT in the present case asked itself the wrong question by limiting its consideration to the written agreement between the local authority and GGM.

It argues that the evidence was that the arrangement in the present case encompassed a number of parties, including the local authority, GGM, the appellant and the respondents. Admittedly there was no documentation in evidence identifying any money GGM may have received as having been paid by the occupiers. It was the wider business model which should have been considered. The point was that GGM and the appellant were in business. The parties agreed that it was plain that the appellant had been part of a group with GGM. Money passed from GGM to the local housing authority under the agreement: the £980/month. It must have come from somewhere. The FTT should or could have inferred that it had come from the respondents to GGM. It failed to do so because it had asked itself the wrong question, limiting its consideration to the effect of the agreement between the local authority and GGM, rather than considering the wider arrangement. It was submitted that while this Tribunal might not itself be able to infer that that the money had come from the respondents to GGM, it should remit the matter to the FTT for a re-hearing on the correct basis.

The Respondent argued that either the FTT was right for the reasons that it had given; or if not, its decision should be upheld on other grounds.

The first question is whether the FTT had indeed considered just the agreement between the local authority and GGM, or whether it had considered the arrangement between them as a whole.

The FTT plainly knew that it should consider the ‘arrangement,’ because it set out the statutory provision referring to it (in particular in paras. 16 and 18 of the decision). It referred not only to the agreement between the local authority and GGM but also to the document setting out the arrangement between GGM and the appellant - the document referred to at para 4 above (para. 9 of the FTT decision), so it had that in mind.

At para. 20 of its decision it, asked itself the right question, namely,

At para. 30 it recorded that “Mr. Owen [who appeared below] argued that but for its agreement with GGM the local authority would have received rent for the property”. In other words, that was the arrangement then relied on. There was no attempt on the part of the appellant to argue that this was a mischaracterisation of the argument raised in the FTT on the part of the appellant, but I take that to be implicit in its case.

At para. 32 it again asked itself the right questions in the following terms.

In dealing with the ‘but for’ element of the test, the FTT referred to both the agreement and the arrangement, and the appellant was successful on that point (para 33).

In dealing with the ‘by virtue of’ point, however, the FTT referred first (para 34) to the agreement between GGM and the local authority, and found that it made no mention of any payments made by occupiers and no reference to the appellant whatsoever; that nothing in the document set out inter-company arrangements between the appellant and GGM showing that the appellant was required to make any payments to GGM; and that nothing in that document showed that the appellant was acting as its agent or trustee. The FTT was therefore applying its mind to the wider arrangement, when considering the agreement as potential evidence of the arrangement.

At para 35, the FTT continued

The appellant relies on this passage as showing that the FTT had, at least at this point, wrongly confined its consideration to the agreement between the local authority and GGM. It is plain by this point in the decision, however, that the FTT was still asking itself the right questions, that is, whether the arrangement in question had the requisite features for the exception to apply. It was approaching the matter on the basis that the relevant arrangement in the case was the agreement between the local authority and GGM. It rejected the argument that the possibility that the way in which some money derived from the payments made by occupiers to the appellant might have made its way to GGM might have been part of the arrangement, on the footing that the agreement did not provide for it, so that it could not have been by virtue of the arrangement.

It was plainly right to do so. There was no evidence at all of any wider arrangement, beyond the agreement, by virtue of which GGM might have received rents or other payments made by the occupiers. Considering the wider business model, as proposed by the appellant, would not have founded an inference of such an arrangement outside or including the agreement. The FTT was of course aware that that GGM and the appellant were in business and that money passed from GGM to the local housing authority under the agreement (the £980/month) and that it must have come from somewhere. But there was no evidential basis for an inference that it came from the respondents; or that it did so by virtue of an arrangement into which the local housing authority had entered. Assuming money was indeed received by GGM, it may have come from other parties than the appellant with which it did business or had a relationship, or from other occupiers, including other occupiers of other properties; or from its own general mixed funds to which various sources might have contributed. There was no evidential basis upon which the moneys paid by the occupants might have been traced through to GGM.

Accordingly, it is not that the FTT did not consider the wider picture because it had asked itself the wrong question, but that it did not base its decision upon it precisely because had asked itself the right one. That is put beyond doubt by its observation in para 36 that the FTT

In oral argument, the appellant suggested that if the FTT had focused on the right question, namely the arrangement, rather than the specific agreement, it might have found or asked for evidence identifying a trail of payments from the occupiers to GGM. It was for the parties to decide what evidence they placed before the Tribunal. The appellant accepted before me that, on the evidence actually placed before the FTT, it was not possible to identify a trail of payments from the occupiers further than to the appellant.

It follows that the concern raised by the appellant, that the decision of the FTT might undermine the anti-avoidance effect of the statutory provision posited in Cabo v Dezotti [2022] UKUT 240 (LC), does not arise.