Upper Tribunal Tax and Chancery Chamber

[2025] UKUT 00278 (TCC)

Fecha: 22-May-2025

HMRC’s decision

HMRC’s decision

174.

Ms Fletcher’s reasoning in her review decision is set out above at §§51–52. She concluded that there was not reasonable disclosure, since the Self Assessment returns did not identify the loan and to whom it was made, the relevant arrangements, and whether income tax was due.

175.

Ms Fletcher’s subsequent witness statement explained that she had looked at various company and individual tax returns, but had not considered any AAG forms as none had been referred to. As regards the Self Assessments which are now relied on by Airedale, and using the example set out above of Mr Chadwick’s return, she provided further detail of her reasons as follows:

(1)

The return stated that the company had established the named EFRBS but gave no further detail of that scheme and did not mention the SRN.

(2)

The return stated that the company subsequently created a sub-trust for the benefit of the individual and various other employees. There was no reference to a loan and thus no reference to individuals being loaned sums of money. Nor was there an explanation of whether the sub-trust was connected with the EFRBS or how, or where the money had come from.

(3)

The return stated that an agreement was entered into on 12 July 2013, but did not give details of the parties to that agreement or what its terms were.

(4)

The statement that the agreement “resulted in me owing a debt of GBP 500,000 to this sub-trust” was inadequate to indicate a loan between two entities. It did not say that the sub-trust loaned £500,000 to Mr Chadwick. Nor was a “debt” necessarily evidence of a loan, since there could be many reasons why an individual owed another a debt, such as payment for work done.

(5)

The return expressly stated that there was no employment-related loan under s. 175 ITEPA 2003 and thus no charge to tax.

176.

Ms Fletcher exhibited and referred to the same internal HMRC operational note that we refer to at §136 above, relying particularly on the following guidance:

“It is not sufficient to identify that a loan or quasi loan was made, the disclosure also needs to identify the loan or quasi loan, e.g. who was the lender, what amount was loaned and when.”
“The disclosure needs to clearly identify the person to whom the loan was made, a class of persons is not sufficient.”
“To be reasonable disclosure, the relevant returns need to give enough information so we know how the arrangement works and we have a reasonable awareness that income tax is due on the loan or quasi loan as employment or trading income. It is not sufficient if a disclosure merely states that a loan or quasi loan is taxable as an employment related benefit without giving enough information for us to be aware that the loan or quasi loan is taxable as income.”