UT (Tax & Chancery) UT/2023/000103 - [2025] UKUT 00102 (TCC)

The meaning of the statutory test at s 268(7)(a) has been considered in two previous UT judgments, HMRC v Sippchoice [2017] UKUT 0087 (TCC) (“Sippchoice”) and HMRC v Bella Figura [2020] UKUT 0120 (TCC) (“Bella Figura”).

In Sippchoice, the UT begin their consideration of the provision by saying at [36]:

“It is clear that, on its terms, s 268(7)(a) FA 2004 requires both that the scheme administrator has formed a belief that an unauthorised payment was not a scheme chargeable payment and that such belief must be reasonably held.”

Before the FTT and before us, both parties proceeded on the basis that MLT believed that Pension Funding Deals entered into by Ballards, Criticall and Gannon were not scheme chargeable payments, and we have taken that to be the position. The issue is thus whether MLT’s belief was “reasonable”.

The meaning of the word “reasonable” was considered in Perrin v HMRC [2018] UKUT 0156 (TCC) in the context of what was meant by a “reasonable excuse”. The UT held as follows (emphasis in original):

“[71] …the task facing the FTT when considering a reasonable excuse defence is to determine whether facts exist which, when judged objectively, amount to a reasonable excuse for the default and accordingly give rise to a valid defence. The burden of establishing the existence of those facts, on a balance of probabilities, lies on the taxpayer…

[72] In deciding whether the excuse put forward is, viewed objectively, sufficient to amount to a reasonable excuse, the tribunal should bear in mind all relevant circumstances; because the issue is whether the particular taxpayer has a reasonable excuse, the experience, knowledge and other attributes of the particular taxpayer should be taken into account, as well as the situation in which that taxpayer was at the relevant time or times.”

We find that the same approach is appropriate in determining whether an administrator “reasonably believed that the unauthorised payment was not a scheme chargeable payment”. The FTT must therefore decide “whether facts exist which viewed objectively” are sufficient to prove, on the balance of probabilities, that the particular administrator acted reasonably, taking into account its “experience, knowledge and other attributes [and]the situation in which [it] was at the relevant time or times”.