Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2023/000098 - [2024] UKUT 00404 (TCC)

Fecha: 16-Oct-2024

Reasoning of the FTT in the Decision

Reasoning of the FTT in the Decision

41.

Mr Elliott accepted that the FTT had set out the issue correctly at [14] and in its proposed approach at [22] to [24], identifying that the focus must be to establish the reason or substantial reason why the Payment was made by the Appellant to the Trustee, but also explaining that when considering this enquiry the FTT could look at subsequent events.

42.

However, Mr Elliott submitted that the focus of the FTT then shifted and it asked itself a different question, namely whether the principal of a “genuinely repayable loan” could constitute earnings (or, in the terminology used by the FTT, a “reward or benefit”). The FTT made an error of law at [33] to [37], in particular in its overall conclusion that “the Loan was a reward or benefit” ([36]), and in its summary of this issue at [37] that “Its payment to MC…was potentially within the ambit of section 62 …Whether it was earnings depends on the substantial reason for its payment.” Here, Mr Elliott submitted that “its” and “it” were referring to the Loan.

43.

Mr Elliott submitted that this error was part of the reasoning of the FTT in reaching its conclusion, referring to:

(1)

In its conclusions at [56] to [57] the FTT referred back to its conclusion in [33] to [37]. The FTT’s reference to “In these circumstances…” in [57] then brings in its conclusions on all three of the questions which it asked itself which had included whether a loan could be a reward or benefit.

(2)

There was a conflation between the Payment and the Loan in these concluding paragraphs. In [57] the FTT expressed its view that the Payment was paid by the Appellant as a reward for the services supplied by MC to the Appellant, but there had been no finding of fact that the Payment to the Trustee was a reward for MC’s services.

(3)

The FTT considered the Baxendale Walker cases at [58] to [61] and at [61] said that “By parity of reasoning…” and referred again to the loans being capable of being a reward or benefit.

44.

Mr Elliott submitted that the FTT’s conclusion about the Loan being a reward or benefit was a critical part of its reasoning. It was not the case that the FTT had simply decided that the Payment itself was earnings. The error of law was material to the Decision and the Decision should be set aside.