© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H3. Benefit and value
- Loan not a benefit for the purposes of tax on earnings
"[101] We do not consider that viewing the facts realistically to determine whether the making of the Loan to MC constitutes a payment of earnings assists HMRC. Whilst warning against misplaced reliance on judicial glosses in relation to the concept of "payment", in Rangers SC Lord Hodge described at [52] and [53] the gloss of "money placed unreservedly at the disposal" as a practical and sensible one. In Aberdeen Asset Management the money held by each cashbox company was at the employee's unreserved disposal, and they could have taken the steps required to obtain absolute entitlement to the money, even though what they owned was shares in the relevant company. Here, MC has an obligation to repay the Loan, and even when taking account of the findings of fact made by the FTT as to the arrangements being prewired (which included the purchase of the Shares and the loan by KC to the Appellant) and the finding that the loan from KC to the Appellant was repayable to her whenever she wanted, and the FTT's conclusion that this could be used for their "mutual benefit", the position remains that MC owns the Shares and has a liability to the Trustee. The money lent to him was not placed unreservedly at his disposal.
[102] The making of the Loan to MC was not a payment of earnings to him. The FTT made an error of law in concluding at [37] that in the vast majority of cases in practices a loan will confer a "benefit" on the borrower, that this Loan conferred a benefit on MC and that its payment to MC was potentially earnings (depending on the substantial reason for its payment)." (M R Currell Limited v. HMRC [2024] UKUT 404 (TCC), Richard Smith J and Judge Zaman)
- What is obtained is the benefit of the funds provided
"[87] This exposes the key point. The provision of a loan, at whatever rate of interest, provides access to the cash lent, but that cannot be considered in isolation from the repayment obligation. The existence of that obligation is critical. What is obtained is the benefit of the funds provided, but subject to an obligation to repay. The fact that the money went back to the Company cannot assist HMRC in demonstrating that the Payment was taxable, any more than the retention of the proceeds of the Loan by Mrs Currell, or indeed by Mr Currell, would have done. If anything, and given that the entire arrangement was "prewired", the fact that the Loan proceeds were returned to the Company might suggest that nothing had really happened." (HMRC v. Currell [2026] EWCA Civ 445, Falk LJ)
Benefit
- Intent to benefit involves intention to improve a person's position
"[59] As some sort of comparison with a pre-existing position is required in order to determine the gratuitous benefit question, even on HMRC’s case, and given that HMRC accept that ordinarily an intent to confer benefit involves an element of intention to improve a person’s position, the difference between the parties may not in fact be enormous. The most notable difference is that HMRC contend for a much narrower, and more technical, approach in carrying out the inevitable comparison than do the appellants, rejecting an examination of the position in substance. And of course their application of that approach to these facts produces a radically different result." (Parry v. HMRC [2020] UKSC 35, Lady Black)
- Intent to benefit requires more than entering into a transaction that, as a matter of law, confers a benefit
"[60] In interpreting section 10, it is important to keep in mind that the question is not simply, “Was a gratuitous benefit conferred on any person?” The search is for what the disponor intended, and in particular for whether the disponor intended to confer any gratuitous benefit on any person. If, by the three questions that they say must be asked (see para 51 above), HMRC assert that the relevant intention is merely an intention on the part of the disponor to engage in a transaction which, as a matter of legal analysis, creates new rights which confer a benefit on a person, I cannot accept that that would be correct. It would be surprising if it were, as it would potentially prevent the application of section 10 in the sort of commercial arm’s length transactions where it would normally have a role. For instance, in a bad commercial bargain where the purchaser quite unknowingly pays more than an item is worth, the purchaser intends to make the purchase and, as a matter of legal analysis, the transaction confers on the vendor the right to keep the overpayment, which is a gratuitous benefit, for which he has not given value. Indeed, had this been all the intention required, it might have been argued by HMRC that there was no need to explore Mrs Staveley’s thinking about the potential IHT advantages of the PPP, because the mere fact that she intended to make a disposition which, as a matter of law, carried those advantages took matters outside section 10 without more." (Parry v. HMRC [2020] UKSC 35, Lady Black)
- No intent to benefit where person receives no more than they would have had in any event
"[61] The disponor’s actual intention in making the disposition is, therefore, in point. That militates against an over-technical interpretation of what is meant by “confer any gratuitous benefit”. To my mind, the approach taken by the majority in the Court of Appeal is essentially the correct one. The words “confer” and “benefit” have to be given their ordinary meaning, and the dictionary definitions (see Newey LJ’s para 88, quoted at para 40 above) show that they import the idea of granting or bestowing some advantage on the recipient. Like Newey LJ, I do not think it is appropriate to speak of a disposition having been intended to confer any gratuitous benefit if the recipient of the benefit was intended to receive no more than he would have had in any event. It is necessary, therefore, to ask whether the disponor was intending, by the overall effect of the disposition, to put the recipient in a better position, or, to borrow from what Newey LJ said at para 88, putting things broadly, to ask whether the disposition was being used to improve someone’s position on a gratuitous basis. The exercise is not, however, simply a matter of asking the disponor whether or not he or she intended to confer benefit, as Miss Wilson submits would be all that was required under the appellants’ test. I go so far with HMRC as to accept that it is not possible to consider whether a disposition was intended to improve someone’s position without taking into account what rights the recipient had, in law, before and after the disposition. This legal context will permit a more rigorous evaluation of whether the requisite absence of intention has been shown. But this legal analysis of the rights is a factor in the evaluation, not the be all and end all of the consideration. I do not accept, for example, that the mere fact that the rights are to be enjoyed in a different legal form after the disposition means that they are necessarily a gratuitous benefit. Furthermore, I cannot accept the return to zero analysis, whereby the existing set of rights must necessarily be treated as ending immediately prior to the disposition, with a new set commencing which, in comparison to the void left by the ending of the pre-existing rights, can then be described as beneficial. There must, as I see it, be more attention paid to the practical reality of the legal situation than that wholly artificial analysis permits." (Parry v. HMRC [2020] UKSC 35, Lady Black)
- Intending someone to benefit not the same as intending to confer a benefit
"[65] What is crucial, of course, is what Mrs Staveley intended. Given that, even factoring in a legal analysis of the sons’ position at each stage, the disposition cannot be said to have conferred a gratuitous benefit on them, it would be surprising if it could nonetheless be concluded that there had been a failure to show the requisite absence of intention. The finding of the FTT was that Mrs Staveley did not intend to improve the sons’ position by transferring the funds. I would not criticise the Court of Appeal’s conclusion that the FTT impliedly found that, when she signed the Expression of Wish form nominating her sons, Mrs Staveley intended to benefit them (see para 44 above, and also para 103(vi) of Newey LJ’s judgment). However, this is not relevant to Transfer Issue 1, in my view. In the circumstances of this case, making the nomination does not amount to conferring a relevant benefit, and Mrs Staveley’s benign intention in this regard cannot amount to an intention to confer gratuitous benefit." (Parry v. HMRC [2020] UKSC 35, Lady Black)
Value
- Elusive word
" "Value" is an elusive word: it may mean market value, it may mean value in money to the owner, or it may have other meanings like the value of the work necessary to produce it or even sentimental value. No one suggests that here itmeans sentimental value and I do not think that the appellant argued that it means cost of production - for that may have no relation to the present value of the thing or right to anybody. And the appellant rightly declined to argue that it means value to the owner, for that was expressly disapproved in Tennant's case [1892] A.C. 150 and would often be almost impossible to assess. I think that in the end counsel argued for market value.
...
Any right or property has different values for different people: if put up to auction many people bid at first but one by one they drop out when the bids of others go beyond its value to them, and the highest bid, the market value, is the value to one alone of all the bidders. Why should a man who finds it only just worth while to accept an unassignable perquisite on favourable terms be taxed on something far above its value to him or what he would have been willing to pay for it? Parliament may see fit to make such an enactment in special cases, as it did in Part IV of the Income Tax Act 1952, but I am satisfied that that is not the meaning of the general provisions with regard to perquisites." (Heaton v. Bell [1970] AC 728, at 745, Lord Reid)
- Disregard of restriction that is a sham or inserted solely for tax avoidance
"I say by lawful means because I can see no ground for the Revenue being entitled to disregard a genuine condition restricting the recipient's right to use or dispose of the perquisite. But of course if any restrictive condition is a sham or inserted simply to defeat the claims of the Revenue it can be disregarded." (Heaton v. Bell [1970] AC 728, at 745, Lord Reid)
- Asset may only have value (or enhanced value) in the hands of a particular owner
"[87] It also appears to me that the conclusion is consistent with principle. The fact that the company had no legally enforceable right to require Mr Jones to work for it, either at all or at a reduced level of pay, does not mean that that was not something that the company and its shareholders expected to happen, and which therefore gave the shares value. As Lord Hoffmann pointed out in argument, valuation of an asset, whether land, shares, intellectual property or anything else, is very often based, at least to some extent, on profits which may be hoped or expected to be realised, but to which the owner of the asset has no present legal right. In this case, it can be said that there is a curiosity in that the hope and expectation of profits accruing to the company were (and no doubt still are) limited to the extent that the two shares were owned by Mr and Mrs Jones. In other words, that Mrs Jones's share only had a substantial value at the date it was allotted to her as long as she was its owner and Mr Jones owned the other share. However, the notion that a particular piece of property has value (or has considerably enhanced value) only so long as it is owned by one particular person or class of person, because of some attribute which that person enjoys, or only so long as a particular state of affairs subsists, is conceptually unsurprising and not unfamiliar in practice." (Jones v. Garnett [2007] UKHL 35)