[2025] UKUT 00278 (TCC)

For Fluid Scotland, the disputed tax years are 2008/09 to 2011/12, and the review decision letter was written by Ms Robinson. The letter noted that the claimant had made contributions to BBTs and subsequently EFRBS for the benefit of certain employees, and that HMRC had issued various Regulation 80 determinations and s. 8 decisions. The letter then set out details of the settlement agreement, Fluid Scotland’s claim for repayment under the DRRS, and HMRC’s refusal decision dated 17 June 2021.

In her review of that refusal decision Ms Robinson referred to the recommendations of the Morse Report and the subsequent requirement of s. 20(3)(b) of the Finance Act 2020 limiting the scheme to repayments of amounts which HMRC had “no power to recover”, summarising her understanding of that as follows:

“So voluntary restitution is essentially any voluntary payments that taxpayers had agreed to make in respect of an unprotected year as part of settlements concluded before changes to the scope of the loan charge. It is fully defined at paragraph 3.1.27 of the scheme”.

She went on to explain that:

“For paragraphs 3.1.27.3 and 3.1.27.4, I need to consider if HMRC had taken a step to recover the tax on the loan or quasi loan in the period in which it was made. For the loans made on or after 9 December 2010, if no step has been taken, I then need to consider reasonable disclosure, 3.1.27.5.”

For each of the tax years in question, Ms Robinson accepted that the shortfalls had been treated under the settlement agreements as amounts that HMRC had no power to recover, such that they met the condition in DRRS §3.1.27.4, the exception being the contribution in relation to EFRBS scheme 65012004 (scheme650) in 2012/13 for which HMRC considered there to be no shortfall.

For the years 2008/09, 2009/10, 2010/11 and a contribution under EFRBS scheme 650 in 2011/12, however, Ms Robinson said that the original Regulation 80 determinations and/or s. 8 decisions were capable of being uplifted, such that the condition of “no power to recover” in DRRS §3.1.27.3 was not in fact met. The explanation given was that:

“Although the decisions in place at the time of settlement did not equate to total settlement amount included in the agreement, they were under appeal and capable of being uplifted prior to settlement, either by agreement or varied in review.

If the decision(s) contains the correct class of employees, and the correct tax periods, HMRC has recent case law in its favour in that respect in the case of The Commissioners for HM Revenue and Customs v C M Utilities-Limited 2017 UKUT 0305.”

For the contribution under a different EFRBS scheme 54902593 (scheme 549) in 2011/12, HMRC had made no Regulation 80 determination and it therefore accepted that it had no power to recover the income tax shortfall. It concluded, however, that the reasonable disclosure condition under §3.1.27.5 was not met. Ms Robinson noted that Fluid Scotland had disclosed the use of a tax avoidance scheme for that year in the notes to its corporation tax computation for the calendar year 2011. She said, however, that:

“There is no mention of how the arrangement worked, the amounts loaned, the recipients of the loans or a clear indication that an earnings charge should have been applied. The Disclosure hasn’t therefore been met.”

She further noted that the self-assessment tax return for the director in question did not disclose the use of a tax avoidance scheme. Ms Robinson therefore concluded that she had seen nothing that constituted reasonable disclosure of the scheme used by Fluid Scotland.

Ms Robinson’s letter also responded to specific representations made by Fluid Scotland, including the argument that HMRC lacked the power to recover any insufficiency of income tax by asking the FTT to increase the assessment, since that power only lay with the taxpayer. Ms Robinson replied:

“I have, covered above, where the insufficiency in the amounts assessed, meets the criteria at subsection 3.1.27.4, but those years fail under 3.1.27.3, as HMRC had decisions in place that were under appeal etc. Thus, protecting the duty.”