[2025] UKUT 00278 (TCC)

HMRC implemented ss. 20–21 of the Finance Act 2020 by establishing the DRRS. DRRS §7.4 provides that an applicant that makes a valid application is eligible for repayment of any “Voluntary Restitution”, plus interest, paid to HMRC. “Voluntary Restitution” is defined in §3.1.27 as follows (emphasis added):

“3.1.27

‘Voluntary Restitution’ means the amount paid, treated as paid or due to be paid under a settlement agreement that, at the Commissioners’ discretion, and having regard to paragraphs 4.3 to 4.7, the Commissioners may decide is or is referable to:

3.1.27.1 an amount of:

3.1.27.1.1 income tax; or

3.1.27.1.2 National Insurance contributions;

3.1.27.2 referable (directly or indirectly) to a loan or quasi-loan made on or after 6 April 1999 and before 6 April 2016;

3.1.27.3 that an officer of Revenue and Customs had no power to recover at the time the settlement agreement was made;

3.1.27.4 that was treated for the purposes of the settlement agreement as an amount an officer of Revenue and Customs had no power to recover; and

3.1.27.5 that, in a case where the loan or quasi-loan in paragraph 3.1.27.2 was made on or after 9 December 2010, at a time when an officer of Revenue and Customs had the power to recover the amount a tax return, or two or more tax returns of the same type taken together, contained a reasonable disclosure of the loan or quasi-loan.”

The conditions for repayment under the DRRS therefore differ according to whether the relevant loan was made before or after 9 December 2010, reflecting the recommendations of the Morse Report and the provisions of s. 20 of the Finance Act 2020:

The requirement in §3.1.27.3 that the settled amount must be an amount that HMRC had “no power to recover” is the subject of a deeming provision in DRRS §4.5:

“4.5

For the purposes of paragraphs 3.1.27.3 and 4.6.1, and without limiting the circumstances in which an officer of Revenue and Customs will be treated as having had power to recover an amount at the time a settlement agreement was made, an officer of Revenue and Customs will be treated as having had power to recover an amount at the time a settlement agreement was made if at that time they had:

4.5.1

where the amount is an amount of income tax, issued a determination under regulation 80 of the Income Tax (Pay as You Earn) Regulations 2003 in respect of any year for which the amount may have been payable or had power to issue such a determination; and

4.5.2

where the amount is an amount of Class 1, Class 2 or Class 4 National Insurance contributions, taken action to protect or recover the amount or could have taken action to protect or recover the amount.”

As regards the requirement in DRRS §3.1.27.5 for “reasonable disclosure” in relation to loans made on or after 9 December 2010, DRRS §4.7 provides that this is to be determined in accordance with s. 20(5) of the Finance Act 2020.

The interpretation and application of the “no power to recover” and “reasonable disclosure” requirements are the two overarching disputed points in relation to the claims in this case.