Arrangements

- Arrangement generally connotes involvement of more than one person

"[160]...He suggested that in the absence of an arrangement it was hard to see that PGPH could have an intention or expectation that funding would be provided. I disagree. In my view an intention or expectation is clearly capable of being formed unilaterally, whereas an arrangement generally connotes some plan or understanding involving more than one person. The legislation uses both concepts and I think that is intentional, because they are quite distinct. The definition of development financier includes someone who has entered into any “arrangement” to provide finance, indicating some understanding, agreement or plan to which another person or persons is or are party." (PGPG Limited v. HMRC [2017] UKFTT 782 (TC), Judge Falk)

Arrangement

- Broad but must be understood in context

"[54] As to whether the UURBS is an "employee benefit scheme" within s.1291(2), while I agree that the concept of "arrangement" may be broad it must be read in its context. As Lord Hamblen and Lady Rose said in NCL SC at [72]:

"The term 'other arrangement' must be something akin to a trust or scheme…"" (A D Bly Groundworks and Civil Engineering Limited v. HMRC [2025] EWCA Civ 1443, Falk LJ)

- Context showing arrangement must be akin to trust or scheme

[55] While in NCL it was common ground that the EBT that granted the options in question was an employee benefit scheme (see NCL CA at [71]), the options were held by the Supreme Court not by themselves to be such a scheme. Similarly, what HMRC rely on here are the contractual promises made to the individual employees, in respect of which the accounting provisions were made. There was no broader trust or scheme that existed apart from those contractual undertakings. Those promises are not, even in combination with each other, akin to a trust or scheme." (A D Bly Groundworks and Civil Engineering Limited v. HMRC [2025] EWCA Civ 1443, Falk LJ)

- 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)

- Must have sufficient unity

"[45] In other contexts, the courts have acknowledged that the concept of an "arrangement" must involve some degree of unity or coordination between its component parts. This concept is described by Donovan LJ in Crossland v Hawkins [1961] Ch 537 at pages 549-550 as the relevant parts of an "arrangement" having "sufficient unity" in the context of the meaning of "arrangements" in the settlement provisions (now in chapter 5 Part 5 Income Tax (Trading and Other Income) Act 2005). However, the courts have been reluctant to go beyond that point and impose any further restriction or gloss on the definition (see Lord Walker in Jones v Garnett [2007] UKHL 35 at [50]). We take the same approach. In our view, questions concerning the scope of the arrangements can only be answered by reference to the context in which the term is used and the facts and circumstances of the particular case." (Coconut Animated Island Limited v. HMRC [2024] UKUT 75 (TCC), Judges Sinfield and Greenbank)

- May require a particular purpose

"[46] In the context of section 257CF, the first point that we note is that the arrangements must exist or be in contemplation either at the time at which the relevant shares are issued or at the time at which the proceeds of the share issue are spent (see section 257CF(1)).

[47] As we have described above, the context also requires that the arrangements must have as a main purpose to secure (i) that a qualifying business activity is carried on by the issuer (CAIL) and (ii) that investors may obtain SEIS relief. The arrangements therefore, in addition to having "sufficient unity", had to have a particular purpose. For want of a better word, we will describe it as a "plan"." (Coconut Animated Island Limited v. HMRC [2024] UKUT 75 (TCC), Judges Sinfield and Greenbank)

- Corporate structure can be an arrangement

"[97] (4) For the avoidance of doubt, I am of the view that UKPNH's corporate structure during the relevant accounting periods was, as a matter of ordinary English usage, a "scheme": it was a planned and designed system of things, with obvious coherence and integrity. I am aware that in Snell v HMRC [2007] STC 1279, a case (like Delinian) concerned with similar statutory language in the context of tax on chargeable gains, the Chancellor of the High Court (at [28]) adopted the Shorter Oxford English Dictionary "ordinary meaning" of "scheme", being 'a plan of action devised in order to attain some end'; however, that was in a different statutory and factual context; in my view, the Snell meaning of "scheme" is apposite where the statutory question is whether a transaction formed part of a scheme (or arrangements); here, where the statutory question is whether certain arrangements that continued over several accounting periods - specifically, a provision of a company's articles - formed part of a scheme, the statutory context evokes the slightly different, but commonplace and well-understood, meaning of "scheme" that speaks more to the outcome or legacy of a 'plan of action', than to the plan itself." (Eastern Power Networks Plc v. HMRC [2025] UKFTT 703 (TC), Judge Citron)

- Any external approvals required for arrangement to take effect must have been obtained

"HMRC accept that any genuine requirement for external approval, which is outside of the control of the parties, before a transaction can proceed will prevent the existence of arrangements until the approval is given (or until it is clear that it will be given). This is because an arrangement must be something that can take effect. (Scottish and Universal Newspapers Ltd v Fisher (1996) CTM80196)" (ETASSUM52031)

- 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)

- Expectation of future events not forming part of arrangement where essence was gift of shares

"[29] The second argument is that the transfer of the share was not the whole of the arrangement, which included the provision of services by Mr Jones, the dividend policy and so forth. Again, I think that would be inconsistent with the argument by which the revenue have, in my opinion, succeeded on the first point. The transfer of the share was in my opinion the essence of the arrangement. The expectation of other future events gave that transfer the necessary element of bounty but the events themselves did not form part of the arrangement." (Jones v. Garnett [2007] UKHL 35)

The expectations as to the future were already taken into account in characterising the transfer of the shares as a gift

"[94] I see the force of that point, particularly as section 660A (6) is concerned with the question of whether the "settlement", as opposed to the transfer of the property comprised in the settlement, constituted an "outright gift". However, it seems to me that the point wrongly detaches the bounty from the property, and that it contains an element of inconsistency, which is rather similar to the inconsistency in the proposition that, because the share was acquired for £1, it cannot be treated as a gift. The only reason that there is a settlement in the present case is that there is an arrangement involving the acquisition of a share which includes an element of "bounty", as a result of what it is anticipated will happen following the acquisition of the share. In other words, the only reason that there is an "arrangement" is that the share acquired by Mrs Jones was, at the time of acquisition, worth more than she paid for it. I therefore find it difficult to see how one can detach the bounty from the property. The notion that there is a gift of the share arises because of what was anticipated, indeed what was intended, to happen in the future." (Jones v. Garnett [2007] UKHL 35)

- 'party to the arrangement' probably requires knowledge of the arrangement

"[56] In the present case, the facts show that CHFE was heavily involved in the arrangements that we have just described. CHFE is referred to on numerous occasions in the Information Memorandum. It was a party to the oral agreement based on the draft PSA and later to the PSA. The oral agreement was in place at the time the investors subscribed for the relevant shares. It formed part of the arrangements and was the means by which the proceeds of the share issues were spent. This is not a case where an unwitting third-party becomes involved in arrangements which have a disqualifying purpose and has no knowledge of that purpose. CHFE's involvement was designed into the arrangements from the outset. It was a party to a step in the arrangements that was key to achieving that purpose. There is no clear finding in the FTT Decision as to which person or persons devised the arrangements but, in our view, it was not necessary to make such a finding in this case. In our view, given the degree of CHFE's involvement, it is appropriate to ascribe to CHFE some participation in the objectives of the arrangements as a whole and to describe it as a "party" to them." (Coconut Animated Island Limited v. HMRC [2024] UKUT 75 (TCC), Judges Sinfield and Greenbank)

- 'party to the arrangement' may or may not require involvement in devising the plan, depending on context

"[54] [The taxpayer] submits that in order to be a party to arrangements, a person needs to be more than just involved in them. The person needs to have had some control over the arrangements or have taken some responsibility for them. We can understand that, in an appropriate case, a distinction might need to be made between a person who was directly involved in the making of the arrangements - that is, in formulating the plan - and a person who was more peripherally involved - such as a person who becomes involved in a transaction that is contemplated by the arrangements, but played no part in devising them. For example, if arrangements involved the possibility that, at some stage in the future, an asset might be sold to a third party or an agreement might be reached with a third-party for the provision of services, the third-party purchaser or supplier, who is unaware of the purpose of the arrangements, might not be regarded as a party to arrangements at the time that they are planned and first implemented. However, that is not the case here. We do not need to decide whether a person in such circumstances would be a party or not and we do not do so.

[55] We think, however, that Ms Brown's approach is too narrow. The question as to who should be regarded as a "party" to the arrangements has to be determined by reference to the context. In the context of section 257CF, as we have described, the relevant arrangements must possess two features: they have to exist or to be in contemplation at the time at which the shares are issued or when the proceeds of the share issue are spent; and they have to have a particular purpose. In our view, a person can be regarded as a "party" to arrangements that fall within section 257CF if, at the relevant time, they have sufficient involvement in the arrangements that it is appropriate to treat them as participating in that purpose. The relevant degree of involvement depends on the circumstances, but may be wider than being directly involved in devising the arrangements." (Coconut Animated Island Limited v. HMRC [2024] UKUT 75 (TCC), Judges Sinfield and Greenbank)

- 'party to the arrangement' does not require formality

"[32]...we do not see how anything in the OED definitions relied on makes good that that there is a requirement for formality before someone is considered a party. Moreover on the facts here there is no issue with formality as Entertainment was in any event a contractual party to the PSA which was accepted to be part of the arrangements. There is also nothing in Hoopla's points which persuades we should not follow Coconut UT and depart from or elaborate on the "sufficient involvement test." Coconut UT proposed at [55] of its decision (set out at [23] above)." (Hoopla Animation Limited v. HMRC [2025] UKUT 28 (TCC), Judges Raghavan and Aleksander)

- Need not be a party to all the arrangements

"[34] As HMRC identify, this point was not argued in Hoopla's grounds of appeal before the UT but we are content nevertheless to address it given its obvious lack of merit. If the PSA contract was part of the arrangements (here there was no dispute it was), then we cannot see how someone who was party to that would not also then be party to the arrangements. They would by definition be so. It is also inconsistent with the analysis in Coconut UT (at [56]). In that case it was disputed that the PSA was part of the arrangements. However, the UT having found the PSA (in the form of oral agreement foreshadowing the documentary one) was part of the arrangements, a central component of its view that Entertainment was party to the arrangements was that Entertainment was party to the PSA." (Hoopla Animation Limited v. HMRC [2025] UKUT 28 (TCC), Judges Raghavan and Aleksander)

- Party to arrangement need not have control over the arrangement

"[42] In our view Hoopla's arguments that Entertainment could not ensure Entertainment's services were issued or that it did not have creative control over the production of the programming or merchandise in no way detract from it plainly being open to the FTT to conclude Entertainment had "sufficient involvement" such that it was appropriate to treat it as constituting a "party to" the arrangements (in line with the approach the UT in Coconut UT set out)." (Hoopla Animation Limited v. HMRC [2025] UKUT 28 (TCC), Judges Raghavan and Aleksander)

Under an arrangement: not the arrangement itself

"[53] I also do not agree with the alternative submission of Ms Rebecca Murray (for HMRC) that the relevant "property" was the chose in action held by the employees in the form of their rights under the UURBS. It is not a natural use of language to describe those rights as property held "under" the scheme, particularly when the word "held" is read in its context "held, or may be used, under", still less would it be natural to apply the label "employee benefit contributions" to the creation of such property. They represent the employee's rights in or against the scheme, not the employer's contributions..."

(A D Bly Groundworks and Civil Engineering Limited v. HMRC [2025] EWCA Civ 1443, Falk LJ)