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N2-5: Specific words and phrases
"Adjustment required or authorised by law" generally limited to statutory adjustments
"[29] Leaving aside the question, discussed further below, of whether it is appropriate to refer to pre-tax rewrite authority, we do not consider that Lowry assists HMRC. There was no finding in that case of what ordinary principles of commercial accounting then required. There was no equivalent to section 46 CTA 2009 giving statutory primacy to generally accepted accounting practice. Tax is the creature of statute and, as the citations above from Odeon and William Grant make clear, adjustments required or authorised to be made to profits calculated in accordance with generally accepted accounting principles are likely to be adjustments specified by statute. While it is possible for a judge-made rule to require or authorise such an adjustment to be made, it would have to be a rule which it is clear applies notwithstanding that the company’s profits have been calculated in accordance with generally accepted accounting principles. Lowry provides no support for there being such a rule. Nor have we been referred to any other authority which shows there to be a relevant such rule. In addition, as Pennycuick VC pointed out in Odeon, there is no general theoretical basis for the courts to calculate profits other than generally accepted accounting principles.
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[33] There is nothing in the cases cited to us, or in the taxing statute or in the accounting standards themselves that make a distinction between those accounting practices which are directed at showing a true and fair picture of profit and those which are directed at showing a true and fair picture of something else. There is no adjustment required or authorised by law to the effect that if profits in the P&L account are depressed because of an entry which is matching an entry in the balance sheet, then that is to be left out of account in calculating profits for corporation tax. Nor do we see any policy justification for drawing that distinction. On the contrary, a company’s balance sheet and P&L account are not separate and severable in the way that Mr Ghosh’s argument suggests because entries on one may affect entries on the other in order that, overall, they give a true and fair view of the financial state of the company. The requirements set out in IFRS2 themselves demonstrate the interrelation between the two documents by specifying that a P&L account item is matched by a balance sheet item. Further, the logic behind identifying a capital contribution from the parent in the grant of share options to the subsidiary’s employees and in treating the consideration for that as the ephemeral additional services provided by the subsidiary’s employees incentivised by the grant of the options is a logic that is based in the real world - that is indeed what is happening in a commercial sense. There is in our judgment no basis for ignoring those aspects of the transaction when applying section 46." (HMRC v. NCL Investments Ltd [2022] UKSC 9)
“Arrangement” - plan of action devised for a purpose
"[41] On the other hand, HMRC submitted, a "scheme or arrangements" are, as the Chancellor explained in Snell, respectively "a plan of action devised in order to attain some end" and "a structure or combination of things for a purpose" (see [28] above]). To identify the relevant scheme or arrangements, it is necessary to look at what was intended and why what was done was done in the way it was done. Purposes and motives are integral to the identification of the relevant scheme or arrangements. And crucially, one single exchange may form part of more than one, maybe many, schemes or arrangements. Because the exchange and the scheme are so dramatically different, HMRC submitted that it was not meaningful to suggest, as Euromoney did, that the exchange could not, on the normal use of language, "form part of" a smaller scheme. Size was irrelevant." (Delinian Limited v. HMRC [2023] EWCA Civ 1281 Vos, Snowden, Whipple LJJJ)
"[56] The Tribunal considers that transactions entered into by different parties at different points in time will in practice almost inevitably be part of the same “arrangements” if they are effected pursuant to a single plan formulated before they are effected, and if the parties to each of the transactions are aware of that plan and are acting with the intention of giving effect to it." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
- Entirely separate businesses may form part of same arrangement
"[13] The Respondents take no issue with this description of the arrangements other than to make the following argument. They argue that HMRC have confused two separate sets of arrangements. This is because UKCO is involved in two separate businesses which have nothing to do with each other. The first is an “umbrella company” business which has nothing to do with the arrangements involving the Lender. The second is the business of providing “contract management” services on behalf of IOMCO.
[14] This is an unattractive argument when one considers the deliberately wide definition given to “arrangements” by section 318 FA 2004 which provides that “arrangements” includes any scheme, transaction or series of transactions. The transactions, as evidenced by the movement of funds, clearly show the involvement of UKCO in the arrangement. It is, of course, entirely possible to have two very separate businesses (even when not carried on by the same legal entity) which form part of a scheme or series of transactions. Just because UKCO carries on two separate businesses does not mean that the two businesses cannot be part of the “arrangements”. Even if I were to exclude from consideration the “umbrella company” part of the business I am still left with the “contract management” part. That involved, even on the Respondents case, UKCO acting, at all times, as an undisclosed agent for IOMCO in order to present, wrongly, to the UK agencies or intermediaries (and perhaps to the individual users) that they were dealing with a UK domiciled and resident company. Even acting as an agent, in these circumstances, is sufficient in my view to bring UKCO within the arrangements.
[15] What the Respondents seek to do here is to artificially restrict the arrangements in question so that they exclude (or at the very least minimise) the involvement of UKCO. This is clearly misconceived." (HMRC v. Smartpay Limited [2022] UKFTT 146 (TC), Judge Malek)
"Avoidance of tax" course of action designed to conflict with or defeat the evident intention of Parliament
"[59] In general, it may be said that it is not tax avoidance to accept an offer of freedom from tax which Parliament has deliberately made, but that it is tax avoidance to adopt a course of action designed to conflict with or defeat the evident intention of Parliament by taking advantage of a fiscally attractive option afforded by the tax legislation without incurring the 11 economic consequences that Parliament intended to be suffered by any taxpayer qualifying for such reduction in tax liability (Inland Revenue Commissioners v Willoughby [1997] 1 WLR 1071 (“Willoughby”), 1079B-G, 1081B-D).
[60] It may also be said that where there are two ways for a taxpayer to carry out a genuine commercial transaction, it is natural for the taxpayer to choose the way that will involve paying the least amount of tax, and that the taxpayer by making that choice cannot for that reason alone be said to be acting with a main purpose of avoiding tax (Commissioners of Inland Revenue v Brebner (1967) 43 TC 705, 718H-I). However, it follows from the previous paragraph above that a taxpayer in this situation may well be acting with a main purpose of avoiding tax if the chosen way conflicts with or defeats the evident intention of Parliament. The mere fact that the taxpayer is carrying out a genuine commercial transaction does not mean that no means adopted for effecting that transaction can ever be tax avoidance." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
- Using a deferral relief to then claim a full exemption is avoidance of tax
"[54] Lord Nolan in Willoughby was contrasting tax avoidance with the acceptance of a deliberate offer made by Parliament of freedom from tax. That was not the situation in this case. Euromoney's scheme or arrangements involved deferring tax in order later to take advantage of the substantial shareholdings exemption. That was to rely on a provision intended to defer tax to secure an outcome where no tax was paid. The meaning of tax avoidance in section 137(1) is clear without the need to refer to Willoughby. If the scheme or arrangements lead to the non-payment of tax that would otherwise have had to be paid, even if deferred, then that is tax avoidance for these purposes." (Delinian Limited v. HMRC [2023] EWCA Civ 1281 Vos, Snowden, Whipple LJJJ)
Connection
- "On, or in connection with" has a range of meanings and might be construed narrowly
"[69] These cases show that the meaning of "on, or in connection with" is heavily dependent both on context and policy. The phrase might require what Robert Walker LJ in Coventry Waste referred to as "a strong and close nexus" or it might require "a weak and loose one". Ben-Odeco v Powlson introduces the concept of remoteness, which is another way of considering the same question.
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"[76] It follows that the words "in connection with" in s.360B(1) are to be construed relatively narrowly, as requiring a strong and close nexus with the physical works of conversion, renovation or repair that enable the building to become available and suitable for business use. Whether particular expenditure meets that requirement is to be assessed realistically, applying the principle set out in BMBF." (London Luton Hotel BPRA Property Fund LLP v. HMRC [2023] EWCA Civ 362, Whipple, Falk, Lewison LJJJ)
Infer from context
"[70]...In determining the meaning of the words "in connection with" as they appear in s.360B(1) there are three points which emerge from their context. First, the words "in connection with" are followed by a short list of the types of work with which the connection must exist for the expenditure to qualify. The items on that list are linked by a common thread. They are all types of physical work on the particular building. The list comprises works of conversion (s.360B(1)(a)), renovation (s.360B(1)(b)) and incidental repairs (s.360B(1)(c)). We infer that the focus of the legislation is on the physical works undertaken. The context in which the words appear in this legislation has some similarity with the context identified in Herons Court. Physical works are at the heart of this relief.
[71] Secondly, s.360B(1) operates when a qualifying building becomes, by a process of conversion or renovation, "qualifying business premises". The latter term is defined in s.360D(1) in terms that extend to premises which are "used, or available and suitable for letting for use", for business purposes (s.360D(1)(b)). The LLP makes much of the reference to "used". But that word is followed by the words "or available and suitable for letting for use", and the lowest common denominator is the availability of suitable converted premises, not the fact of their use. Here too, the focus is on the physical subject matter of the converted premises in a manner consistent with s.360B(1), and not on their use." (London Luton Hotel BPRA Property Fund LLP v. HMRC [2023] EWCA Civ 362, Whipple, Falk, Lewison LJJJ)
Infer from purpose
"[73]...The purpose was therefore to encourage the conversion or renovation of disused properties to make them available for business use. Further, the purpose was not to provide tax efficient investment opportunities for high net worth individuals. That may be the consequence of such individuals investing in works which qualify for BPRA – accepting that BPRA aimed to attract investment and the tax relief it offered would be most attractive to those paying higher rates of tax – but the cart must not be put before the horse, and the legislative aim should not be overstated or mischaracterised.
In our judgment, these contextual features point towards the words "in connection with" being construed relatively narrowly. The connection must, by inference, be with the particular works of conversion (or renovation or repair) which lead to the building being, at least, "available and suitable for letting". It is not necessary that it be used in fact; availability and suitability are sufficient. The scope of expenditure capable of qualifying for allowances cannot differ according to whether it results in premises that are actually in use, as opposed to being available and suitable for use." (London Luton Hotel BPRA Property Fund LLP v. HMRC [2023] EWCA Civ 362, Whipple, Falk, Lewison LJJJ)
Infer from consequences of alternative meanings
"[75] We test that conclusion by asking ourselves what the outcome would be if the opposite view were taken and a broad meaning were adopted. Two problems come into view. First, that would open the door to an obvious risk of abuse and avoidance of tax because BPRA could be claimed on expenditure of all sorts, even where the connection with the conversion (or renovation or repair) works was tenuous. Secondly, that could lead to unfairness between taxpayers, because the position could differ fundamentally between cases where the property comes into use for the purposes of the taxpayer's own trade (or, as in this case, that of a related party) and where it is let or available for letting to a third party tenant; it could also differ between cases where a structured arrangement is put in place as it was in this case and other cases where works are funded more conventionally. The desirability of construing tax legislation in a way that leads to fairness as between taxpayers was emphasised by Lord Wilberforce in Ben-Odeco v Powlson. He referred at p. 1098 B-C to "the principle of the laws of taxation … that, in the absence of clear contrary direction, taxpayers in, objectively, similar situations should receive similar tax treatment". Lord Hailsham made a similar point at p. 1100 G. We do not consider that Parliament can be taken to have intended this legislation to be construed in a way which leads to the sort of perverse outcomes we have identified." (London Luton Hotel BPRA Property Fund LLP v. HMRC [2023] EWCA Civ 362, Whipple, Falk, Lewison LJJJ)
'Entitled'
- Focus is on transaction under which income arose and not connected transactions
"[52] In Khan, it was held that on a purposive reading of identical words in a different provision of legislation, focus had to be on the particular transaction under which the distribution arose, and not on the connected transactions considered as a composite whole [52]. The same applies here, and the focus must be on the transaction giving rise to the income in question. I do not understand that approach to be disputed in principle although there is a dispute about the way it is applied and with what result." (Good v. HMRC [2023] EWCA Civ 114)
- Person is entitled to income if they assign the right to it and the assignee must use it for their benefit
"[62] In agreement with HMRC's case, I reject the proposition that the taxpayer had completely alienated his rights in the MAPs so as no longer to be entitled to them. That does not reflect the reality of these arrangements. The MAPs were assigned in parallel with the Lender's obligation to use them to discharge the taxpayer's obligations under the Loan. The taxpayer derived a clear benefit from the MAPs, each time they were paid while the Loan remained outstanding, sufficient to mean that the taxpayer remained "entitled to" the MAPs for the purposes of s 611." (Good v. HMRC [2023] EWCA Civ 114)
- "Beneficially entitled"
Back to back contractual arrangements for the receipt and payment of interest meaning that the intermediary is not beneficially entitled to it
"[28] The exception in s. 933 thus looks to the practical reality of whether there are sums that can readily and fairly be collected from a UK resident company. That function suggests that the term “beneficially entitled” in s. 933 does not only exclude situations where the recipient is a fiduciary, but may also (depending on the particular circumstances) exclude situations where the commercial and practical reality of the matter is that the interest, once received by the UK resident company, is then paid on to an entity outside the UK, because in that situation there is the same underlying concern that tax on the income will not in practice be able to be collected.
[29] We also agree with Mr Vallat that it would be extraordinary if one could avoid the imposition of the s. 874 collection mechanism simply by interposing a company such as Houmet, which has no commercial function other than to sidestep the withholding provisions. Purposively construed, the exception is drawn for the benefit of UK companies who are substantively entitled to receive and enjoy the income, not those who are beneficially entitled only in the narrower technical sense used to distinguish between legal and equitable interests in English common law.
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[33]...Section 933 is therefore a provision for which the lack of business purpose for the company’s involvement in receiving the interest is relevant in considering whether the company is beneficially entitled to the sum." (Hargreaves Property Holdings Limited [2023] UKUT 120 (TCC), Bacon J and Judge Raghavan)
"Exchange" refers to the whole exchange, not part of it
"The exchange was simply the share transactions agreed between the commercial parties. In this case, the exchange was the issue of ordinary and preference shares in Diamond in exchange for Euromoney's shares in Capital Data and Capital Net. It was neither necessary nor appropriate to consider the reasons or motives for the exchange when identifying the transaction itself. That analysis, one might note, works as well for a reconstruction or an amalgamation as it does for an exchange." (Delinian Limited v. HMRC [2023] EWCA Civ 1281 Vos, Snowden, Whipple LJJJ)
"Exclusively" means solely
"[96] In our judgment, the wording in paragraph 5(1) is clear and requires that the property is acquired "exclusively" for one of the specified purposes. "Exclusively" is defined in the OED as: "So as to exclude all except some particular object, subject, etc.; solely". We therefore agree with and adopt the statement at [24] in the Tribunal decision in Consultus:
"[24] It is notable that paragraph 5(1) requires that a property is acquired "exclusively" for one of the specified purposes. It is not a main purpose test (which could be satisfied where there was more than one purpose and one of those could be said to be the main purpose). The express language requires that the only purpose of CCN is one of those specified (in this case for exploitation as a source of rents as a qualifying property rental business)."" (Investment And Securities Trust Limited v. HMRC [2024] UKFTT 230 (TC), Judge Williams)
Expenditure
- Can include incurring an obligation
"Parties were agreed that on the authority of Chaney v Watkis [1986] STC 89, 58 Tax Cas 707 the incurring of an obligation which is capable of being valued in money could constitute expenditure for the purposes of s.32." (Garner v. Pounds Shipowners and Shipbreakers Limited [2003] UKHL 30, Lord Jauncey)
"Incurred" does not necessarily require the bearing of economic burden
"[103] HMRC refers to the decision in Ingenious Games LLP; Inside Track Productions LLP; Ingenious Film Partners 2 LLP [2019] STC 1851, where the UT expressed the view (obiter) that an expense will only be “incurred” where the taxpayer bears the “economic burden” of an expense. HMRC invites the Tribunal to apply the same approach in the context of this case.
[104] Having considered the judgment of the Supreme Court in Revenue and Customs Commissioners v NCL Investments Ltd [2022] UKSC 9, with regard to section 54 of the Corporation Tax Act 2009 (which is analogous to section 34 ITTOIA 2005 and provides, for corporation tax purposes, that no deduction is allowed for expenses not incurred wholly and exclusively for the purposes of the trade), I reject the approach suggested by HMRC. The point is addressed by the Supreme Court, as follows:
“36. As to whether the Debits were expenses “incurred”, Mr Ghosh points out that neither section 48, nor any other provision in CTA 2009, deems the Debits to have been “incurred” by the Companies. He submits that given that the Companies suffered no cost in relation to the Debits, the Debits cannot be said to have been “incurred” by the Companies.
37. In this connection, Mr Ghosh again seeks to rely on Lowry and the majority’s approach in that case to what was required for expenses to be “laid out or expended”, the predecessor wording to “incurred” in section 54(1)(a). Reliance is also placed on an obiter passage in the Upper Tribunal’s decision in in Ingenious Games LLP v Revenue and Customs Comrs [2019] STC 1851, in which it was stated that the term “incurred” in section 54(1)(a) CTA 2009 is “concerned with whether the taxpayer bore the economic burden of an expense” (para 434) and that that approach “makes sense given the context of the statutory test, namely the determination of profit” (para 457).
38. We reject HMRC’s case that section 54 imports a further requirement as to what constitutes an “expense”, namely that it has to be shown to be “incurred”. The requirements for what constitutes an expense are as set out in sections 46 and 48. These are part of Chapter 3 which is headed “Trade Profits: basic rules”. Those basic rules require that it is brought into account as a debit in accordance with generally accepted accounting principles (section 46). If so, it will be an expense for the purpose of the calculation of trading profits, whether or not an amount has actually been paid (section 48(1) and (2)).”
[105] In Mr Northwood’s case, the basic rules also require profits of the trade to be calculated in accordance with generally accepted accounting practice (under section 25(1) ITTOIA 2005). I do not consider there to be a further requirement for Mr Northwood’s contribution to be shown to be “incurred” and I do not accept, as HMRC suggest, that I should adopt a different approach because the Supreme Court decision was in the context of a case that did not concern tax avoidance." (Northwood v. HMRC [2023] UKFTT 351 (TC), Judge Sukul)
Paid
- "Contributions paid" means paid in money
"[62] At paragraph 42 in Sippchoice the Upper Tribunal found that
“… If, as we have found, ‘contributions paid’ in section 188(1) FA 2004 means paid in money then it cannot encompass settlement by transfer of non-monetary assets even if the transfer is made in satisfaction of an earlier obligation to contribute money. An agreement to accept something other than money as performance of an obligation to pay in money does not convert the transfer of shares (or other assets) into a payment in money. It is difficult to see why legislation relating to pension contributions should distinguish between and provide different tax treatments for transfers of assets in place of payments made under a contractual obligation and transfers of assets in place of payments made freely at the option of the payer.” (emphasis added).
It is clear from paragraph 46 of Sippchoice that the Upper Tribunal found that a transfer of non-cash assets made in satisfaction of pre-existing money debts are not contributions paid. The IOU is a pre-existing money debt. That is why, in order to succeed in these appeals, the appellant needs to establish that the IOU is a contribution paid."
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[75] Whilst I accept that the IOU, once delivered to the Scheme, is an asset of the Scheme, I find that it is the same as any other creditor recorded as an asset. Those creditors have not paid anything until they actually make a payment." (Mattioli Woods Plc v. HMRC [2022] UKFTT 179 (TC), Judge Anne Scott)
- Can include discharge of cash contribution debt in specie
"[92] Therefore the answer to the first question posed in the second Agreed Issue is that if there is a “cash contribution debt” which is discharged by a payment in specie that can be “pension contributions paid” within section 188 FA 2004 ie where the payment is made in order to discharge a monetary obligation." (Killik & Co LLP v. HMRC [2023] UKFTT 653 (TC), Judge Anne Scott)
- "Payment" is amount net of VAT
"[51] This suggests that the legislation is directed at payments which result in an actual economic loss to the pension fund. A payment of VAT which can be reclaimed by the pension fund does not result in an economic loss to the pension fund.
[52] For these reasons, we agree with the Appellants, particularly by reference to the purpose of the legislation that “payment” in this context should not include any recoverable input tax." (Morgan Lloyd Trustees Limited v. HMRC [2023] UKFTT 355 (TC), Judge Short)
- Existence of 'payment' depends on practical, business reality, including any composite transaction
"[82]...The question whether a "payment" is made for these purposes should be answered by looking at the practical, business reality of the transaction, including any composite transaction of which the payment forms part. If the intended purpose and effect of the transactions is that money leaves the scheme and is placed at the free disposal of the member, the mere fact that the money may be subject to an equitable obligation to restore it to the scheme will not prevent it from being a "payment" in the ordinary sense of that word. To conclude otherwise would deprive the charge to tax of effect in many of the most egregious cases where it is most needed." (Clark v. HMRC [2020] EWCA Civ 204, Henders, Bean, Nicola Davies LJJJ)
Permit
- Giving permission for something which could not otherwise be done lawfully or not taking steps to prevent
"[114] [The taxpayer] contended that had it been intended to subject purchasers to higher-rate SDLT and ATED simply if "a non-qualifying individual will be occupying a dwelling on the land", paragraph 5(2) would have said so. The permission element must indicate that it is being given by a party who is in a position to meaningfully give it through their real control of who may use the property. That contention is supported by established case law. We agree with Mr Sykes' submissions.
[115] In Tophams Ltd v Sefton (Earl) [1967] 1 A.C. 50 at 68, Lord Guest said:
"Apart altogether from authority I would think that outside the sphere of purely polite social language, the word "permit", used even between laymen bent on serious business or other affairs intended to have legal consequences, would be used as a word connoting on the part of the one whose permission is asked the right effectively to refuse and on the part of the applicant the necessity to ask for and obtain permission, so as lawfully to undertake his proposed course of action. This, in my view, is its legal meaning."
[116] The meaning of the "permit" was considered by Atkin LJ in Berton and Others v Alliance Economic Investment Company [1922] 1 K.B. 742. He said at [755]:
"Now the words 'permitting and suffering' do not bear the same meaning as 'knowing of and being privy to'; the meaning of them is that the defendant should not concur in any act over which he had a control."
[117] And at [759]:
"To my mind the word 'permit' means one of two things, either to give leave for an act which without that leave could not be legally done, or to abstain from taking reasonable steps to prevent the act where it is within a man's power to prevent it."
[118] We find that the Option did not grant IST any possession over the Property and did not give it the ability to influence or decide whether or not Ms Voice occupied the Property. The evidence on this point was clear and we accept it: it is and has always been IST's position (confirmed in correspondence and witness evidence) that Ms Voice occupied the Property as of right in her capacity as freeholder.
[119] HMRC alternatively contended in their Statement of Case at paragraph 129: "that, by voluntarily entering into an agreement which allowed, or did not prevent, the occupation, [Ms Voice] was permitted to occupy the Property". We can deal with this point in short order. We cannot find any support for such an interpretation of "permitted" in the established case law." (Investment And Securities Trust Limited v. HMRC [2024] UKFTT 230 (TC), Judge Williams)
Possession
- "Person entitled to possession" does not include a company with no real or practical ability to exercise legal right to possession
"[49] In our view, Parliament cannot sensibly be taken to have intended that “the person entitled to possession” of an unoccupied property on whom the liability for rates is imposed should encompass a company which has no real or practical ability to exercise its legal right to possession and on which that legal right has been conferred for no purpose other than the avoidance of liability for rates. Still less can Parliament rationally be taken to have intended that an entitlement created with the aim of acting unlawfully and abusing procedures provided by company and insolvency law should fall within the statutory description.
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[51] We emphasise that this conclusion is not founded on the fact that the defendant’s only motive in granting the lease was to avoid paying business rates, although that was undoubtedly so. If the leases entered into by the defendants had the effect that they were not liable for business rates, their motive for granting the leases is irrelevant. Nor does it illuminate the legal issues to use words such as “artificial” or “contrived” to describe the leases, when it is now accepted that they created genuine legal rights and obligations and were not shams. Our conclusion is based squarely and solely on a purposive interpretation of the relevant statutory provisions and an analysis of the facts in the light of the provisions so construed." (Hurstwood Properties (A) Ltd v. Rossendale BC [2021] UKSC 16)
Property
- "Property" of trust means net property
"[35] In St Barbe Green, the deceased’s “personal” estate (as opposed to his interests as life tenant under certain trusts) had more liabilities than assets i.e. it was insolvent. The issue in the case was whether the excess of his liabilities over the assets in his personal estate could be used to reduce the value of the assets in the trusts (that fell to be part of his estate per s49(1)). The trustees argued that the effect of s5(3) was that the free estate was to be aggregated with the settlements, so that the balance of the free estate was available to reduce the assets in the trusts. It was held that the net liabilities were not available to reduce the estate beyond the value of the personal estate’s assets that were liable to meet them.
[36] At [12], Mann J stated that “the property” in s49(1) must mean “net property” in the sense of the value of the property net of trust liabilities; as he put it, we have in s49(1) the notion of property from which liabilities have been notionally deducted. The judge said that the same notion can be applied in s5(1) (which refers to the aggregate of all “the property” to which someone is beneficially entitled i.e. like s49(1), it refers to “the property”)." (Pride v. HMRC [2023] UKFTT 316 (TC), Judge Citron)
Purpose
- Distinguish from effect
"[114] Thus, in all but obvious cases it is necessary to "look into the mind" of a taxpayer, and object must be distinguished from effect. Both of those points apply equally to the unallowable purpose rules." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- "Purpose" means the intended effect not the motive for wanting that effect
"Therefore, motive is not necessarily the same as object or purpose. Further, "some" results are "so inevitably and inextricably involved" in an activity that they must be a purpose for it. An example of that was Miss Mallalieu's sober garb. Another was the facts of the instant case, where the costs "cannot but have been intended to serve the purpose of establishing a comfortable private home for the partner concerned"." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
"[61] “Purpose” means the intended effect of the arrangements, not the motive of the taxpayer for wanting to achieve the intended effects. A determination of “purpose” therefore does not necessarily require a determination of the subjective state of mind of the taxpayer, but may be ascertainable from the terms of the arrangements themselves. Where there is a complicated series of transactions that were the result of a concerted plan, and where a consideration of the whole of the transactions shows that there was concerted action to achieve an end of the avoidance of tax, then one of the ends sought to be achieved was the avoidance of liability to tax (Newton v Commissioner of Taxation [1958] AC 450, 465-467)." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
- The fact that the purpose was not/could not be achieved does not negate the purpose
"[63] There is a distinction between the purpose of arrangements, and the question whether the arrangements are effective in achieving that purpose. The fact that arrangements ultimately fail to achieve their purpose (for instance, because they ultimately fail to satisfy the necessary legal criteria to produce the intended legal effect) will not retrospectively negate the fact that they had that purpose. Purpose does not mean “end result in fact”, as opposed to the end result that the arrangements were designed to achieve. Arrangements may be intended to achieve a purpose, even if they ultimately fail to achieve it due to an inherent flaw in the design of the arrangements themselves. Thus, arrangements can have the purpose of avoidance of liability to tax, even if ultimately no liability to tax is avoided." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
- Subjective purpose of relevant actor
"[124] Millett LJ's useful summary brings out the points already referred to derived from Mallalieu and MacKinlay. For present purposes "object" can also be regarded as synonymous with purpose. So far as relevant to this case, and gathering the points together, I would summarise the key points as follows:
a) Save in "obvious" cases, ascertaining the object or purpose of something involves an inquiry into the subjective intentions of the relevant actor..." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- Usually of directors for a company (unless bypassed or acting on instructions)
"[108] It was also common ground that for a corporate entity such as LLC5, which can only act through human agents, it is necessary to consider the subjective purpose of the relevant decision makers. Unless they have been bypassed or are effectively acting on instruction, that will normally be the board of directors. The same would apply to LLC5, although strictly its board was termed a "Board of Managers", appointed pursuant to the terms of its LLC agreement. There was no suggestion that the board of LLC5 had either been bypassed or were acting on instruction when they agreed to enter into the Loans." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- "Why" they did it is usually a good starting point
"[162] As Nugee LJ suggested in argument, a simple starting point in ascertaining a person's purpose for doing something is to consider "why" they did it. While this will not cover all the nuances – and in particular the potential distinction between purpose and motives discussed in MacKinlay – it is a sensible starting point.
[163] There is an obvious answer to that question on the facts of this case. However it might be dressed up, LLC5 became a party to the Loans to obtain a tax advantage." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- Tax may be a purpose even if directors specifically put it out of their mind in taking decision if that was only reason for company existing
"[164] As has already been said, the board members of LLC5 were not operating in a vacuum. Mr Kushel was involved in the transaction in any event and the others had been briefed at an earlier stage. Much of the substantive discussion at the board meeting was about tax. The board obviously understood what the Loans were designed to achieve. Although, as already discussed, the purpose or purposes of being a party to a loan relationship cannot simply be elided with the purpose for which the relevant entity exists, in this case LLC5 had no other function. Its sole raison d'être was to enter into the Loans to obtain tax advantages for the BlackRock group.
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[169] I do not consider that these conclusions involve an inappropriate attack on the unchallenged evidence of Mr Kushel or Mr Fleming, or on the FTT's findings of fact. I agree with the UT that there is an analogy with TDS. In that case a conclusion that the company had a tax main purpose in using the relevant shares as it did was found not to be inconsistent with the honestly held view of the relevant director, a Mr Turner, that the shares continued to be held exclusively for the commercial purpose for which they were originally acquired. Similarly, in this case the fact that LLC5 had a tax avoidance main purpose is not inconsistent with board members properly putting the tax benefits out of their minds when deciding whether the transaction was in LLC5's best interests on a standalone basis. The two questions are different.
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[171] I should emphasise that my conclusion that LLC5 had a tax main purpose is a conclusion reached on the particular facts of this case. It does not follow that other debt incurred in connection with a commercial acquisition – as the acquisition of BGI US undoubtedly was – would fall foul of the unallowable purpose rule even if the decision to borrow had regard, as it often would, to tax considerations. The facts of this case include, among other things, the use of a debt-funded UK resident entity in what is otherwise a wholly US-based, and equity funded, ownership chain, the related lack of any commercial rationale for LLC5, and the structure that then had to be put in place to ensure that LLC5 did not have control over the BGI US group, such that LLC5 not only had no commercial rationale but had no real commercial function." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- Not inevitably limited to conscious purpose (if effect so inevitable and inextricable that it must be a purpose)
"[116] So while object and effect are not the same, object is not "inevitably limited" to conscious motives. The reality was that Miss Mallalieu obviously needed clothes for warmth and decency, and no doubt would have had to accept that if she was asked. This could not be described as merely an incidental effect or consequence. Her choice of a particular style and colour, which she would not otherwise wear, did not change that inescapable fact." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- Unavoidable effect not necessarily a purpose
"[146] Purpose must be distinguished from effect. Even unavoidable effects are not necessarily the same as purposes. This is particularly clear from Lord Brightman's example in Mallalieu of a medical consultant's trip to the South of France (see [113] above). It cannot therefore be the case that any inevitable consequence can be a purpose. Indeed, the authorities spell that out: both Lord Oliver in MacKinlay and Millett LJ in Vodafone refer to "some" consequences or results being inevitably and inextricably involved in particular activities ([119] and [122] above)." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- Inevitable tax consequences of taking out a loan do not, of themselves, amount to tax advantage purpose
"[150] How then should this point be addressed in the context of s.442? The unallowable purpose rule forms part of a code, contained in Part 5 of CTA 2009, which governs the treatment of loan relationships for corporation tax purposes, and which among other things specifically contemplates tax relief for interest and other expenses of raising debt. The corporation tax relief available is obviously a valuable relief. It is unrealistic to suppose that it will not form part of ordinary decision-making processes about methods of funding a company. Indeed, it might well be wrong for directors to ignore that consideration in deciding what is in the best interests of the company concerned. I agree with Mr Prosser's submission that it cannot have been Parliament's intention that the inevitable consequence of taking out a loan should engage the unallowable purpose rules, subject only to consideration of whether the value of the tax relief is sufficient to make it a "main" purpose. Something more is needed.
[151] I therefore agree with BlackRock that the FTT should not have applied the test in Mallalieu as it did. This is not for the reason given by the UT (to the effect that it should simply have applied TDS) because it is not the case that Mallalieu and the later cases that discuss it are irrelevant. Rather, the FTT made an error of law in proceeding on the basis that the "inevitable" consequence of tax relief was, without more, a main purpose." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
- Not a matter of simply asking the decision maker
"[124]...(f) It is for the fact finding tribunal to determine the object or purpose sought to be achieved, and that question is not answered simply by asking the decision maker." (Blackrock Holdco 5 LLC v. HMRC [2024] EWCA Civ 330, Falk, Jackson, Nugee LJJJ)
Main Purpose
- "Main purpose" connotes importance, but may be one of several main purposes
"The parties were largely agreed in relation to the “ordinary meaning” of this phrase. They agreed that:
(1) the phrase “main purpose or one of the main purposes” was not defined in the Treaty;
(2) however, it was legitimate to interpret the phrase in accordance with relevant UK case law pursuant to Article 3(2) of the Treaty, which specified that terms which were not defined in the Treaty were to be interpreted in accordance with the provisions of the tax law of the relevant contracting state (in this case, the UK);
(3) determining a person’s main purpose was a question of fact - see Inland Revenue Commissioners v Brebner [1967] 2 AC 18 (“Brebner”) at paragraphs 26B-C and 30C-E;
(4) the conclusion of fact was to be made “upon a consideration of all the relevant evidence…and the proper inferences to be drawn from that evidence” - see Brebner at paragraph 30G;
(5) the test required consideration of the subjective intentions of the relevant person - see Brebner at 27D-E and 30B;
(6) the word “main” did not mean “more than trivial”. Instead, it had the connotation of importance - Travel Document Services v The Commissioners for Her Majesty’s Revenue and Customs [2018] STC 723 (“TDS”) at paragraph [48]; and
(7) in order for this test to be satisfied, it was not necessary for the relevant matter - in this case, taking advantage of Article 12(5) - to be the sole purpose or the only main purpose. It was sufficient for the relevant matter to be one of several main purposes." (Burlington Loan Management DAC v. HMRC [2022] UKFTT 290 (TC), Judge Beare)
- Tax avoidance not a main purpose where no important and transaction would have gone ahead irrespective
"[32] The FTT made findings of fact about the circumstances in which Euromoney concluded the exchange transaction at [51]-[56]. It found that: (a) the potential tax saving was not important to Euromoney, (b) tax was not a main driver of the transaction which would have gone ahead whether or not tax could be saved, (c) it was Euromoney's intention to proceed with the cash deal if its request for preference shares had been refused, (d) Euromoney devoted limited resources to the tax aspects of the transaction, (e) the application to HMRC for clearance under section 138 did not hold up the transaction timetable, and (f) the exchange was completed without waiting for HMRC's response to that clearance application." Delinian Limited v. HMRC [2023] EWCA Civ 1281 Vos, Snowden, Whipple LJJJ)
- Reason for choosing a particular means of implementing a purpose may also give rise to another purpose (e.g. tax avoidance)
"[64] The Tribunal does not accept the Appellant’s argument that there is necessarily a distinction between the purpose of arrangements, and the reason for choosing particular means for giving effect to that purpose. The Appellant gives the hypothetical example of a businessperson who travels from A to B to attend a business meeting, and who decides to travel by rail by a particular circuitous route in the belief that a discount will be offered on all future rail travel for 12 months if the trip is undertaken by that specific route. The Appellant suggests that in this example, the sole purpose of the journey is to attend the business meeting, and obtaining a discount on future travel is merely the reason for choosing a particular means for achieving this purpose. The Tribunal does not consider this to be a valid analysis for purposes of paragraph 2(4A) Schedule 7 FA 2003.
[65] In this example, the overall arrangement is not for a trip from A to B, but rather for a trip from A to B via the particular route chosen. The overall arrangement as a whole has two purposes, namely (1) to attend a business meeting in B, and (2) to obtain a discount on future travel. Even if, at the outset, the businessperson is unaware of the possibility of the discount, and is only proposing to travel from A to B by the quickest route, once that person becomes aware of the possibility of the discount and deliberately decides to travel specifically by the more circuitous route in order to obtain this benefit, the specific route becomes part of the overall arrangement, and obtaining the discount becomes one of the purposes of the trip.
[66] Where there are two ways for a taxpayer to carry out a bona fide commercial transaction, one of which involves tax avoidance and one of which does not, and where the taxpayer chooses the way that involves tax avoidance, then tax avoidance will be at least one of the purposes of adopting that course, whether or not the taxpayer has a subjective motive of avoiding tax (Willoughby at 1079C-D, 1081B-D)." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
- Commercial transaction can be undertaken in a way with a main purpose of tax avoidance
"[117] Finally, I think it follows from the wording of the legislation that even if the overall purpose of any transaction in securities is a non-tax purpose, section 684(1)(c) can still apply, and the transaction be subject to counteraction, if the way in which the transaction is carried out demonstrates that the obtaining of an income tax transaction was also a main purpose. This is, in a sense, merely demonstrating the point that a transaction can have more than one main purpose, as explained above. The transaction can have a non- tax related main purpose but at the same time be carried out in a manner that demonstrates that obtaining an income tax advantage was also a main purpose. Obtaining a tax advantage does not have to be a predominant purpose – it is enough that is simply a main purpose.
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[136] I do not, therefore, accept Mr Timms' evidence that the tax benefit of achieving capital gains tax, rather than income tax, treatment for the extraction of £1.8 million from Jenbest/Proline was merely incidental or, as he put it, “the icing on the cake”. It seems to me that, although there were other commercial and personal (i.e. non tax) purposes involved, one of the main purposes of the reorganisation, and of the way in which it was structured, was to enable the Appellants to achieve an income tax advantage on the subsequent repurchase of the preference shares.
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[142] In any event, as [HMRC] submitted, it is hard to see how the issue and repurchase of the preference shares furthered the objective of facilitating the retirement plans of the Appellants. Even after the repurchase of the preference shares, the three Appellants together still held 75% of the ordinary shares in Jenbest, thus retaining a collective controlling stake, regardless of whether they retired. In fact, they only retired in 2019 after they had sold their ordinary shares to a third party in 2017.
[143] I therefore accept [HMRC's] submission that in reality the main result of the issue and repurchase of the preference shares was the extraction of £1.8 million from Jenbest/Proline by the Appellants and that, indeed, this was a main purpose of that issue and repurchase." (Wroe v. HMRC [2022] UKFTT 143 (TC) Judge Brannan)
- Can still be a main purpose even if less significant than another main purpose
"[69] A purpose will be a “main” purpose if its achievement is one of the primary aims of the arrangements. A purpose can be a “main” purpose, even if it is not as significant a consideration as another main purpose. Thus, if arrangements are driven by two particularly significant aims, A and B, as well as other subsidiary aims, both A and B may both be “main” purposes even if the taxpayer considers A to be more important than B.
[70] Indeed, purpose B could be a main purpose of the arrangements, even if the arrangements would not have been entered into at all but for the need to achieve purpose A. Even if purpose A is the sole reason for entering into arrangements in the first place, once the decision to enter into the arrangements has been taken, an additional purpose can become an additional main purpose of the arrangements. Whether this is the case will be a question of fact, depending on the individual case. The question is whether a purpose is one of the main purposes, not whether it is the most important purpose, and not whether the arrangements would be proceeded with in the absence of any of the other purposes." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
- Charitable purpose may be subsidiary or main purpose depending on the facts
"[49] For the above reasons we conclude, like the FTT implicitly did, that the practical provision of Relief is not, as argued by Mr Thomas, just part and parcel of the philosophy of Freemasonry so that it must be regarded as being in service of that philosophical aim and incapable of being regarded as a main aim in its own right. In principle, charitable activity is certainly an activity that is capable of being a subsidiary aim in service of a main aim but can also be a separate main aim. It follows that we reject the argument that had the FTT properly addressed the Appellant's case it was bound to conclude that the provision of Relief was subsumed in the philosophical aim." (United Grand Lodge of England v. HMRC [2023] UKUT 307 (TCC), Judges Ramshaw and Poole)
- “Incidental” means subordinate
"[73] Notwithstanding those differences, we agree that the question of whether one thing is incidental to another is a qualitative rather than a quantitative test. However, it is possible to contemplate situations in which the sheer quantity of one thing relative to another might call into question whether the former could be properly described as incidental to the latter.
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We consider that the FTT did not make an error of law in stating (at paragraph [170]) that something is incidental to another matter if it is subordinate, or secondary, to it. The critical element in our opinion is the element of subordination. This is not the same as merely identifying anticipated uses and ranking them in terms of importance, and, as the FTT recognised (again at paragraph [170]), is not the same as a test of main or primary use." (HMRC v. Dolphin Drilling Limited [2022] UKUT 212 (TCC), Falk J and Judge Thomas Scott)
An incidental purpose may still be of some importance
"[76] It follows from this that we consider that the FTT was right to state (at paragraph [175]) that their conclusion that “the use of the Borgsten to provide accommodation to offshore workers could reasonably be supposed to be of some importance” did not preclude a finding that such use was nevertheless incidental to Permitted Uses. The fact that a use is desirable, sought-after or important (by whatever measure) may on its face suggest that it is unlikely to be incidental; but whether it is incidental depends on all the facts and whether such use is (or in this case can reasonably be supposed to be) subordinate or secondary to another use." (HMRC v. Dolphin Drilling Limited [2022] UKUT 212 (TCC), Falk J and Judge Thomas Scott)
"Purpose" of contract determined objectively
"[76] The Appellants highlighted London Capital Group, R (On the Application Of) v The Financial Ombudsman Service Ltd [2013] EWHC 2425 in support of the argument that the purpose to which the statute refers is that of the customer entering into the contract. HMRC contended that the reference to the parties’ intention did not support the Appellants’ argument, per Leggatt J at [20] and [24]:
“In accordance with general principle, the purpose of the contract and the intention of the parties must be ascertained objectively by construing the terms of the contract in its factual setting. It is not relevant to ask what Mr Shrubb or London Capital subjectively intended. The task for the court is to ascertain what purpose and intention reasonable people in the situation of the parties to the contract may fairly be taken to have had. …
…the purpose and intention of the parties to the relevant contract must be determined from what they agreed. If what was done did not accord with what was agreed, that cannot affect the question of whether or not rights under the contract are a regulated investment.”
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[395] In considering whether the contracts fall within the scope of s420(4)(b), namely whether their purpose or pretended purpose is to secure a profit or avoid a loss by reference to fluctuations in the value or price of property or an index or other factor designated in the contract, we interpret the provision in accordance with the general principle that the purpose of the contract must be ascertained objectively by construing its terms in its factual setting (per Leggatt J in London Capital Group v Financial Ombudsman [2013] EWHC 2425).
[396] In so doing, we reject Mr Prosser’s submission that we should only take account of the employees’ purposes and not those of the Appellants; although the focus in the London Capital case was on customer as the case involved consumer protection, Leggatt J nevertheless expressly referred to ascertaining the purpose and intention of “the parties”..." (Jones Bros Ruthin v. HMRC [2022] UKFTT 26 (TC), Judge Dean)
"Purpose of an arrangement"
- Generally refers to purpose of whole arrangement rather than just part
"[46] Secondly, whilst it is true that an exchange is qualitatively different from a scheme or arrangements, that does not make it a natural use of language to describe an exchange as forming part of a tax avoiding part of an overall scheme or arrangements or even part of an exchange as forming part of a tax avoiding part of an overall scheme or arrangements. It is, conversely, a natural use of statutory language to ask whether an exchange (i.e. the entire exchange) forms part of a scheme or arrangements (i.e. the whole scheme or arrangements) of which the, or a, main purpose is tax avoidance. The "scheme" undoubtedly adds motives and intentions and plans to the "exchange", but the scheme cannot exclude a part of the exchange or a part of the scheme on the natural meaning of the requirement that the exchange "forms part of" the scheme.
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[48]...But the statute is not asking the FTT to break down the negotiation of either an exchange or a scheme. It is simply asking whether the entire exchange agreed did or did not form part of an entire scheme or arrangements of which the, or a, main purpose was tax avoidance.
[49]...Put another way, section 137(1) envisages that there may be tax avoidance so long as that is not the sole or a main purpose of the scheme or arrangements. Parliament's purpose is clear from the language it used." (Delinian Limited v. HMRC [2023] EWCA Civ 1281 Vos, Snowden, Whipple LJJJ)
- Not necessarily taxpayer's purpose
"[62] The terms of paragraph 2(4A) Schedule 7 FA 2003 refer to the purpose of the arrangements, not the purpose of the taxpayer in entering into the arrangements. Where arrangements are complex and/or have been devised by specialists other than the taxpayer, regard may therefore also be had to wider considerations such as why the arrangements took the form that they did, how those who devised them hoped that they would work, and the way that those who devised them presented them to the taxpayer(s). (Compare Seven Individuals v Revenue and Customs Commissioners [2017] UKUT 132 (TCC) at [97]-[104])." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
"Relating to" may have wider or narrow meaning
"[70] The Court of Appeal [in R (Veolia ES Nottinghamshire Ltd) v Nottinghamshire County Council [2010] EWCA Civ 1214] (per Rix LJ with whom Etherton and Jackson LJJ agreed) rejected Veolia's grounds for resisting disclosure which had included that the contract was not referred to in the accounts, setting out a number of reasons why the concept of "relating to" was not drawn as narrowly as Veolia suggested ([98]-[101]). Rix LJ's reasoning noted, amongst other matters, the auditing context in which that relation arose, and the way in which "relating to" was used elsewhere in the legislation: the relationship was established by the nature and function of the document rather than whether such document happened to be explicitly referred to in the accounts.
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[75] Accordingly, in contrast to the way "related to" was used in the relevant legislation in Veolia there is no difficulty with understanding that term as meaning s220 will only apply to the chargeable periods to which the APA says it applies. That way the suspension of the statutory provisions that might otherwise apply will keep in step with what the parties have specified. The wider interpretation of the scope of "related to" that was apposite in the context of inspection rights of interested persons in Veolia does not seem appropriate for the purposes of Part 5; rather than respecting a bright line between what is covered by the agreement under Part 5 and what is not and therefore under Part 4, it would open up more scope for argument as to the reach of the APA. We acknowledge the legislation does not use the term "specified in" or "covered by" but the concept of "relating to" is capable of different degrees of breadth and we consider the context in which the words "..to which an [APA] relates" appears here is consistent with the more constrained interpretation we have suggested." (R (oao Refinitiv Limited) v. HMRC [2023] UKUT 257 (TCC), Green J and Judge Raghavan)
“So far as not included” does not necessarily imply Parliament had in mind circumstances in which it would be included
“It is right that the draftsman wished to cover the possibility that an amount falling within amount A might also fall within amount B and thus inserted a provision precluding double-counting. The fact that he wished to do so does not, however, demonstrate that he had in mind actual circumstances in which this might occur. He may well have included the exclusion out of caution.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §70, Warren J).
"take advantage" has a negative sense and requires awareness of what is being taken advantage of
"[136] We agree with both parties that the ordinary meaning of the phrase “take advantage” where it appears in Article 12(5) has a negative sense, as the OED definition acknowledges is frequently (albeit not invariably) the case. In this case, the negative sense which the relevant provision is conveying is that entering into an assignment of a debt claim with a main purpose of benefiting from Article 12(1) by means of that assignment is an abuse of that article.
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Thus, we agree with [the taxpayer] that, for this purpose, if a seller can be said to be “taking advantage” of a provision of UK domestic law or a treaty when it sells a debt for a price which reflects its purchaser’s exemption from UK withholding tax pursuant to that provision, and we will address that question in due course, the seller needs to be aware that the relevant provision is Article 12(1) specifically before Article 12(5) can be said to be engaged. Merely knowing that the purchaser is entitled to an exemption from UK withholding tax but without knowing the precise basis for that exemption is insufficient to engage Article 12(5) even if, as it transpires, the purchaser’s exemption stems from Article 12(1)." (Burlington Loan Management DAC v. HMRC [2022] UKFTT 290 (TC), Judge Beare)
“Treated as” implies a result that would not otherwise be the case
“It is to be noted that these profits are not “to be treated” as included but are actually included. This indicates that the word “contribution” in this context subsumes capitalised profits, a meaning which I consider to be a perfectly normal interpretation of the word.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §68, Warren J).