[2025] UKUT 00278 (TCC)

Subparagraphs (a) and (b) – the qualifying loan/quasi-loan and the recipient of the loan/quasi-loan. It is convenient to take the first two conditions together. As discussed above, these conditions require specification of the amount and date of the loan, and identification of its recipient. Fluid Scotland’s case was that its disclosure identified a quasi-loan. In the present case, therefore, the disclosure was required to specify a quasi-loan in the amount of £1m, in March 2012, made to Mr O’Connor.

Mr Goodfellow submitted that all of these could be deduced in the present case from reading the documents set out above. He said, in particular, that it was clear that the EFRBS sums referred to in the notes to the corporate tax computation must have been paid to Mr O’Connor, since he was the sole director of the company, and the company financial statements had noted that contributions to the EFRBS were not considered to be directors’ remuneration.

We consider this submission to be entirely hopeless. Even when the various notes set out above are considered together, there was nothing in those notes to identify how many transactions were involved, on what dates, and to which employees. Note 7 to the corporation tax computation referred to two sets of transactions, with total contributions of £1m for each set of transactions. Nothing in those notes set out a breakdown of the transactions or their dates. Indeed, since the corporation tax computation related to the calendar year 2012, it is not even possible to deduce from the notes relied on that anyloan at all was made in the 2011/12 tax year.

Nor did the notes state that the quasi-loans were made to Mr O’Connor: on the contrary, note 7 to the corporation tax computation referred to “payments to employees”, and agreements with “certain employees” in return for the company crediting “their accounts”, indicating that multiple employees were beneficiaries of the arrangements described there. Note 2 to the financial statements similarly stated that EFRBS contributions were made for the benefit of “the Company’s officers, employees and their wider families”, again indicating that multiple employees were beneficiaries. The mere fact that Mr O’Connor was the company’s sole director does not suggest that he was, contrary to those indications, the sole beneficiary of those arrangements.

Ms Robinson was therefore entirely correct to conclude that the information provided did not identify the amount, date or recipient of the loan in question. The “reasonable disclosure” condition was therefore not met, irrespective of any analysis under the remaining subparagraphs of s. 20(5). For completeness, however, we briefly consider the remaining subparagraphs below.

Subparagraphs (c) and (d) – loan arrangements and further information. We have already addressed (and rejected) Mr Goodfellow’s submission that the disclosure of the use of a DOTAS scheme in the company tax return sufficed to incorporate the contents of the AAG form for that scheme in the company’s disclosure for the purposes of s. 20(5). Ms Robinson therefore did not err in failing to consider the AAG for this particular scheme in her review decision.

That leaves the information provided by Fluid Scotland in its financial statements and corporation tax computation, set out above. Ms Robinson considered that this did not meet the requirements of s. 20(5). In our judgment she was right to take that view.

The only description of the nature of the arrangements was set out in note 7 to the corporation tax computation. That note referred to two sets of transactions, and it is not possible to discern from that which of those sets of transactions referred to the March 2012 contribution for the benefit of Mr O’Connor (not least because, as we have already found, nothing at all in the documents provided the dates of the arrangements referred to, or gave a breakdown of the amounts of the loans).

Even leaving that point aside, the description given in note 7 was too high-level and generic, and did not provide details of what precisely took place and which specific parties were involved. It cannot therefore be said that there was any adequate identification of the arrangements pursuant to which the transactions described in that note were made, let alone information sufficient for it to be apparent that a reasonable case could have been made that one or both of those transactions was liable to tax in the form of PAYE and/or NICs. As an obvious example of that, there was nothing in note 7 which identified that a “relevant step” had been taken by a third party (i.e. a party other than the employer) for the benefit of Mr O’Connor, for the purposes of the test for a quasi-loan in Part 7A ITEPA 2003.

Mr Goodfellow pointed to the fact that (as Dias J noted in Sensor Solutions at §45) HMRC had consistently been challenging loan schemes of this nature. He also noted that HMRC had regularly issued guidance indicating its view that the arrangements did not achieve their objective of avoiding liability to tax. By way of example, Spotlight 12 published on 6 November 2012, Taxing the rewards for work carried for a UK based employer, specifically mentioned that arrangements said to get round the disguised remuneration rules (i.e. Part 7A ITEPA 2003) might involve payments passing through a series of loans from third parties, setting out HMRC’s view that such arrangements did not succeed in avoiding tax and NICS. It further stated that current legislation ensured that “rewards and recognition received from working for UK-based businesses” was charged to UK income tax and NICs. The use of trusts and EFRBS to remunerate employees had also earlier been mentioned in Spotlights 5 and 6.

HMRC accepts that this was relevant background, and that it was (obviously) aware of the use of trust structures to remunerate employees. It emphasised, however, that the relevant question remains what could reasonably be deduced from the specific disclosure made on the facts of a particular case. We agree. The fact that HMRC regularly challenged employee remuneration arrangements involving trust structures did not allow it to “fill in the gaps” in a case where a company’s tax returns clearly failed to provide sufficient information for the purposes of s. 20(5), as was the case for Fluid Scotland. As we have already noted, the question is not whether the information provided was sufficient to indicate to HMRC the need to investigate further. Rather, to meet the s. 20(5)(d) test, it should have been apparent from that information (taken on its own) that a reasonable case could be made as to the liability to tax.

Mr Goodfellow also contended that HMRC must have had sufficient information for the purposes of s. 20(5)(d) since it did in fact issue Regulation 80 determinations in relation to the EFRBS schemes used by the Fluid claimants. We do not accept that argument. As Mr Stone pointed out, the tests are different: a Regulation 80 determination can be issued where it appears to HMRC that there “may” be further tax payable, and may be based on whatever further enquiries HMRC decides to carry out. That is not the same as showing that the information provided in the tax returns was sufficient to make it apparent that there was in fact a reasonable case as to the tax liability.

The disclosures relied on by Fluid Scotland did not therefore satisfy any of the four sub-paragraphs of s. 20(5). Ms Robinson’s decision to that effect was therefore substantively correct.

In so far as the wording of her decision letter and her evidence in these proceedings suggested that she was looking for a “clear indication” of a charge to tax (which she understood to mean a “high probability” that tax was due), we agree with Fluid Scotland that this would put the test too high, given that all that is required is for there to have been a “reasonable case” as to the liability to tax. That does not, however, mean that the decision should be quashed. The Tribunal’s discretion to order the relief sought by the claimants is constrained by the provisions of the Senior Courts Act 1981, which applies to these judicial review proceedings by virtue of s. 15(5) Tribunal Courts and Enforcement Act 2007. Section 31(2A) of that Act provides that the court:

“must refuse to grant relief on an application for judicial review… if it appears to the court to be highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred.”

We are therefore required to consider whether it is highly likely that the decision would not have been substantially different if HMRC had not made the error in question: R (Bradbury) v Awdurdod Parc Cenedlaethol Bannau Brycheiniog (Brecon Beacons National Park Authority) [2025] EWCA Civ 489, §71. In this case, for the reasons set out above, we consider that Ms Robinson’s decision would undoubtedly have been precisely the same if she had applied the test of “reasonable case” rather than a “clear indication” of liability to tax.