[2025] UKUT 00278 (TCC)

Subparagraphs (a) and (b) – the qualifying loan/quasi-loan and the recipient of the loan/quasi-loan. Again, it is convenient to take these conditions together. Mr Mullan relied on the definitions of a loan and quasi-loan to contend that the disclosure made in the Self Assessment tax returns of its directors and employees was sufficient to identify that a loan or quasi-loan had been made to those taxpayers.

We agree with Mr Mullan that, in considering the application of s. 20(5)(a), HMRC had to apply the definitions of a loan and quasi-loan set out in s. 20(8). That in turn referred back to §2 of Schedule 11 of the Finance (No. 2) Act 2017, the relevant provisions of which we have set out at §10 above. While Mr Stone pointed out that those definitions had only entered into force in 2017, which was after the time that the disclosure was first made and would have been looked at by HMRC, those were the definitions adopted by s. 20(8) for the purposes of the repayment scheme which was then implemented in the DRRS. We also agree with Mr Mullan that those definitions of loan and quasi-loan go beyond what might be thought of as a conventional loan.

We do not, however, consider that even on those broad definitions, the disclosure provided by the relevant taxpayers in the Self Assessment returns was sufficient to identify the existence of a loan or quasi-loan made to those taxpayers. While the information provided referred to the date of an agreement, and specified an amount of debt created by that agreement, the description of the agreement did not identify in any way the source of that debt. It certainly did not identify the existence of a loan, in the form of either some form of credit, or a payment purported to be made by way of a loan – in other words what the giver of “any form of credit” had provided. Indeed the comments stated expressly that there was not an employment-related loan for the purposes of s. 175 ITEPA 2003, nor any benefit in kind chargeable to tax. Nor did the information provided identify a quasi-loan: it did not refer to any right to payment or transfer of assets, in connection with a payment or loan or transfer of assets to the taxpayer.

All that was said, in very vague terms, was that the taxpayer owed a debt to a sub-trust pursuant to the relevant agreement. That was in our view manifestly insufficient to identify the existence of a loan or quasi-loan. Airedale’s submissions conspicuously did not specify whether what was disclosed was indeed to be analysed as a loan or a quasi-loan. If Airedale was unable to specify, precisely, whether what was disclosed was a loan or a quasi-loan, it cannot possibly be said that the disclosure identified one or the other of those arrangements so as to meet the test in s. 20(5)(a).

Subparagraphs (c) and (d) – loan arrangements and further information. The essence of Mr Mullan’s submission was that, particularly in light of HMRC’s background knowledge and position on EFRBS schemes, it was not necessary to set out the specific steps in the scheme in order for HMRC to make out a reasonable case that the relevant amounts of tax werepayable.

Mr Mullan’s skeleton argument contained a helpful summary of the various steps involved in the Airedale EFRBS scheme at issue in this claim, as follows:

Mr Mullan’s submission was that HMRC did not need to know all of this detail, but merely needed to know enough for it to have a reasonable case that the scheme did not work as intended (i.e. that it did not in fact avoid the operation of Part 7A ITEPA 2003).

We do not accept that submission. We consider that the disclosure relied on was a plainly inadequate description of the arrangements. As we have set out above, to fulfil the requirements of s. 20(5)(c) and (d) there must (at least) be a description of the transactions and steps which give rise to the loan or quasi-loan, even if that is not set out in exhaustive detail. As a matter of language, the phrase “arrangements in pursuance of which … the loan or quasi-loan was made” contemplates a description of the steps taken, not simply the outcome of those steps. The disclosure relied upon by Airedale fails to set out any of the steps described by Mr Mullan, beyond the creation of a sub-trust for the benefit of various employees. The mere fact that EFRBS and sub-trusts were mentioned would plainly not be sufficient to make it apparent to HMRC that a reasonable case for a tax liability could be made. Even if it were assumed that those comments, together with the note that the view taken “may be a variance with that of HM Revenue & Customs” ought to have aroused suspicion so as to prompt further investigation, that (as discussed above) is not the relevant test.

Ms Fletcher’s decision on this point was therefore absolutely correct.