[2025] UKUT 00278 (TCC)

The other question of interpretation concerns the scope and effect of the specific conditions in s. 20(5)(a)–(d). As a preliminary point, it was common ground that the test in s. 20(5) is a bespoke test and does not adopt (for example) the existing language of s. 29(5) TMA 1970 concerning the circumstances where the information provided to HMRC precludes a discovery assessment for additional income or capital gains tax under s. 29(1). We do not, therefore, consider that guidance issued by HMRC in relation to the different circumstances of a discovery assessment is applicable to the interpretation of s. 20(5). Rather, it is necessary to focus on the content of that provision.

In determining whether the disclosure satisfies the requirements of s. 20(5), the question must be whether the required information is identifiable on the basis of the relevant tax returns. We accept that HMRC can be expected to draw what Dias J described as “obvious inferences” from the information provided (Sensor Solutions §37). It cannot, however, be expected to “embark on an exercise of joining the dots” (Sensor Solutions §§28 and 42).

Subparagraph (a) – the qualifying loan/quasi-loan. A loan or quasi-loan qualifies for the purpose of s. 20 of the Finance Act 2020 if it is made on or after 6 April 1999 and before 6 April 2016: see s. 20(7) (§16 above). As Dias J noted in Sensor Solutions, §39, the requirement in s. 20(5)(a) to identify the qualifying loan or quasi-loan must therefore identify not only the specific amount of the loan, but also the date on which the loan was provided. It is difficult to see how one can identify “the” particular loan or quasi loan which is said to refer to the relevant amount of repayment without stating these basic identifying features. The date of the loan is also necessary in order for HMRC to ascertain the tax year to which the loan is referable.

In his oral submissions Mr Stone also suggested that as part of identifying the loan or quasi-loan one needed to identify the parties to the transaction. We do not think that this is required by subparagraph (a). Identification of the recipient of the loan is, however, required by subparagraph (b), and subparagraph (c) requires the identification of the arrangements made to implement the loan, which is likely to require at the very least a general description of the parties involved.

Subparagraph (b) – the recipient of the loan/quasi-loan. The claimants’ submissions did not take issue with the requirement to identify the recipient of the loan. Rather, the dispute concerned the level of inference that HMRC could be expected to draw. It was common ground that a certain degree of inference is permissible. It is therefore not necessary for the tax return to state expressly that the recipient of the loan was Mr X: the return could instead, for example, say that the recipient was the sole director of the company, if the return elsewhere identifies that sole director. Whatever information is provided should nevertheless enable the beneficiary of the loan to be clearly identified. Whether the disclosure in the tax returns meets that test will inevitably be dependent on the particular facts.

Mr Goodfellow argued that it was sufficient that the identity of the beneficiary should be “ascertainable on a careful reading of the information”. That proposition was ambiguous. If it simply meant that the identity of the beneficiary should be clear from the relevant tax returns (read together if necessary), then we agree. If, however, it suggested an exercise in more extensive inferences and/or piecing the information together, that is precisely the approach which Dias J deprecated as placing an excessive burden on HMRC.

The dependency between subparagraphs (a) and (b) should also be noted. If the loan or quasi-loan has not been validly identified, then it is difficult to see how one can meaningfully identify the recipient of that loan or quasi loan.

Subparagraphs (c) and (d) – loan arrangements and further information. It is convenient to consider these subparagraphs together. The parties’ submissions principally concerned the degree of detail required in order to disclose the “arrangements” and the further “sufficient information” required.

As a general point, we note that these requirements must refer to information that goes beyond the information already contemplated by subparagraphs (a) and (b). In our view that must identify the transactions and steps giving rise to the loan or quasi-loan, although it need not necessarily describe these in exhaustive detail. As a minimum, in the case of a loan, that will require identifying the credit arrangement which has given rise to the loan. In the case of a quasi-loan, what is required is an explanation of how the person making the loan has obtained a right to a payment or transfer of assets, in connection with a payment or a transfer of assets to the recipient of the loan.

Mr Mullan submitted that the purpose of identifying the loan arrangements was to provide information that would be sufficient to alert HMRC to the need to open an enquiry. We disagree. The requirement is not to provide information that might cause HMRC to investigate matters further. Rather, subparagraph (d) provides that the information must be sufficient for “it to be apparent that a reasonable case could have been made that the amount concerned was payable”. That indicates that the information must of itself lead to the conclusion that a reasonable case can be made that the transaction is taxable. Again, however, what is sufficient in any given case will be dependent on the particular facts.

The remaining issue is the application of the principles discussed above to the facts of the decisions in respect of Fluid Scotland and Airedale.