© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H4. Causation and connection
GENERAL
- Presumption that different words are used to denote a different meaning (in connection with v. in pursuance of)
"[71] A relevant aid to statutory interpretation in this case is the presumption that different words are used to denote a different meaning. If different words are used then the court has to do its best to find those different meanings: see Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), section 21.3.
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[80] Thirdly, regulation 28(3)(c) uses different words ("in pursuance of" and "in connection with" the arrangement) thereby indicating that they have different meanings. In pursuance of the arrangement has the meaning of providing funds under or in accordance with the arrangement whose object or effect is making restricted goods or restricted technology available to a person connected with Russia or for use in Russia. As the Court of Appeal held, at para 55, the use of the phrase "in connection with" in "conjunction with 'in pursuance of' indicates a clear intention to cast the net more broadly than financial services or funds provided under or in accordance with the terms of the relevant arrangements (which would be covered by the natural sense of 'in pursuance of')." I agree. The words "in connection with" are far broader than "in pursuance of". In conjunction with the phrase "in pursuance of" they mean anything which factually connects the provision of the funds to the arrangement. The phrase does not require there to be any causal connection." (Unicredit Bank GmbH v. Constitution Aircraft Leasing (Ireland) 3 Ltd [2026] UKSC 10)
- Comparison with other statutory tests identifying types of connection indicating Parliament intended a close connection
"[74] Looking first at the ordinary meaning of the words used in the context of section 11(4)(a), I agree with the Upper Tribunal that the requirement that the expenditure must be "on" the provision of plant indicates a narrow test, requiring a close connection between the expenditure and the plant provided. There are many statutory provisions in relation to tax and other topics that use other phrases to connote a much looser nexus such as "in connection with" or "relating to" or "with a view to". Those phrases do not mean the same as "on". Parliament has used a different test here and, in my judgment, it requires a close connection." (HMRC v. Orsted West of Duddon Sands (UK) Limited [2026] UKSC 12, Lady Rose)
PARTICULAR PHRASES
Arises
- Does not necessarily require a causal link
"[112] The word "arises" and cognate expressions of that word are used repeatedly throughout the chapter both in relation to carried interest and other sums without any guidance whatsoever as to what the word means. Moreoever, as we have already mentioned in paragraph 111(1) above, the primary definitional section - the one defining a "disguised fee" - is worded in exactly the same way as is Section 103KA of the TCGA in that it simply requires there to be arrangements under which the individual performs investment management services in respect of an investment scheme and a management fee arises to the individual - see Section 809EZA(3)(a) of the ITA.
[113] Mr Gardiner said that the very fact that Chapter 5E of Part 13 of the ITA was concerned with disguised investment management fees was enough to establish a requirement that there be a causative link between the receipt of the carried interest and the investment management services. We disagree. We think that it is apparent from the language used in both codes - Chapter 5E of Part 13 of the ITA and Chapter 5 of Part III of the TCGA - that, in order to fall within the relevant code, there need merely be arrangements under which investment management services are performed by an individual and carried interest arises.
[114] It follows from this that, in our view, Mr Nawbatt was correct in saying that there does not need to be a causative link under the arrangements in question between the receipt of the carried interest and the investment management services before the carried interest can be said to "arise" under the arrangements. The definition upon which Mr Gardiner placed reliance at the hearing to establish a causative link does not do so." (Millican v. HMRC [2024] UKFTT 618 (TC), Judge Beare)
As a result of
- A result is something that follows as an actual consequence
"Apart from the cases, let us consider the language of the policy. The phrase is: “As the result.” It does not say “the immediate result,” and indeed one is given six weeks in which to die without stepping outside this policy. It does not say “as the immediate result” but it says “as the result.” What is the definition of “result”? A result is something which follows as an actual consequence. Then did this death follow as an actual consequence of the bodily injury? Of course, nobody but a lawyer could suggest anything to the contrary. Any man in the street, bringing his ordinary intelligence to bear upon that, would, I should have thought, say at once: “Of course it followed as an actual consequence upon this brain injury.” However, I suppose lawyers try to be more exact, and it is seriously urged here that this death was not the result solely of this bodily injury, but was the result, at any rate in part, of a second accident—that is to say, the accident of going into the water." (Smith v. Cornhill Insurance Co Ltd [1938] 3 All ER 145, Atkinson J)
- Profits accruing "as a result of" equated with common law test of causation
"[98] The next question is whether Mr Walker suffered any loss "as a result of" the breaches of statutory duty which I have found to be established. The words "as a result of" are those used in section 62(1) of FSA 1986, but it was common ground before me that the concept of causation which they embody is no different from the test of causation in a common law claim for negligence. It was also common ground that this test will be satisfied if Mr Boakes' advice was an efficient cause (and not necessarily the sole, or even the main, cause) of Mr Walker's decision to make the transfer out of the Taylor Woodrow scheme. The question whether it was an efficient cause should be answered by asking whether, but for Mr Boakes' advice, Mr Walker would have made the transfer. If Mr Walker can show, on the balance of probabilities, that in the absence of Mr Boakes' advice he would not have made the transfer and would have stayed in the Taylor Woodrow scheme, the test of causation will be satisfied. If, on the other hand, he would anyway have decided to transfer, the test will not be satisfied. See generally Clerk & Lindsell on Torts, 19th edition, para 2-07.
If the "but for" test is satisfied in relation to Mr Boakes, it does not matter if it would also be satisfied in respect of one or more other causes, such as the advice of Mr Ellway. Nor would it matter, were it to be established, that Mr Ellway's advice carried more weight with Mr Walker than the advice of Mr Boakes, provided always that Mr Boakes' advice was an efficient cause of Mr Walker's decision to transfer." (Walker v. Inter-alliance Group Plc [2007] EWHC 1858 (Ch), Henderson J)
"[56] Avacade [[2021] EWCA Civ 1206] concerned a company and associated individuals who, it was alleged, were knowingly concerned in contraventions of the UK's financial services legislation. Section 382 of the Financial Services and Markets Act 2000 allows the court to make a restitution order where a person has been knowingly concerned in a relevant breach and "profits have accrued to him as a result of the contravention". In that case customers were persuaded to set up self-invested pension plans (SIPPs) which would purchase various investment products. The question was whether the commissions on the purchase of the investment products were earned "as a result of" the contraventions (which were confined to making arrangements for entering into the SIPPs). It was held that the commissions arose "as a result of" the contraventions. Two reasons were given for this. One was the seamless and indivisible nature of the arrangements, which involved contravention by advising and arranging for the consumers to enter into the SIPPs for the purposes of making the investments. The contravention was a single indivisible set of arrangements. The second was described by Popplewell LJ (with whom the Master of the Rolls and Peter Jackson LJ agreed) like this (at [76]):
"The second reason is that I would equate the test of causation in the words found in s. 382, "as a result of", with the common law test in negligence, namely that the contravention must be an efficient cause, but it need not be the sole or dominant cause: see generally Clerk & Lindsell on Torts, 23rd edn at 2-09ff. … Applying that test I would conclude that the consumer's entry into the SIPP was an efficient cause of the investment in the products and the consequent earning of commission. It was not the sole cause, or even the dominant cause, but the use of the SIPP was a necessary precursor to the investment being made and did more than merely provide the opportunity for the investment. The product investments could only be achieved by calling on the savings of consumers from their pensions, and that required the use of a pension mechanism, the SIPP, in order to make the investment. The transfer into the SIPP had an effective and efficient causative potency in bringing about the product investments and their consequent commission, even if analysed as a separate step in the arrangements.""(Blackfriars Hotel (UK) Holdings Limited v. HMRC [2024] UKFTT 1095 (TC), Judge Blackwell)
- Does not require the identified circumstance to be the only cause
"[58] Bearing in mind the need to construe section 730G in a purposive way, we cannot accept that "relevant profits" must be caused only by tax arrangements. Given that the profits of a company (or a particular head of profits, such as trading profits) can result from many different transactions, Mr Mehta's argument that "relevant profits" must be caused solely by tax arrangements would allow a company to introduce tax arrangements into a pre-existing activity (for example, a trade or, as here, a lending business) with complete impunity as far as section 730G is concerned. To our mind, such a proposition runs even more strongly counter to the policy behind section 730G than the proposition that section 730G can only operate on a company which has no profits other than relevant profits, and we have already explained that we cannot accept that proposition as it narrows the scope of a clear anti-avoidance provision in a way which Parliament cannot possibly have intended." (Blackfriars Hotel (UK) Holdings Limited v. HMRC [2024] UKFTT 1095 (TC), Judge Blackwell)
- Can include indirectly and alone or with other causes
"[150] In my view, it is a mistake to read "as a result of" too restrictively. Whilst it definitely connotes a causal link between the "transfer" and the "associated operation", it does not stipulate that the causality should be direct (as opposed to indirect), or immediate (in the sense of without any intermediate or intervening cause), or should be solely and exclusive (in the sense that there cannot be any other contributory cause), or should happen within a particular timescale." (Moran v. HMRC [2025] UKFTT 540 (TC), Judge McNall)
- Must be an "efficient cause"
"[60] We would respectfully adopt Popplewell LJ's expression in Avacade and hold that, for profits to arise as a result of tax arrangements, those arrangements must be an efficient cause of the profits, but they need not be the sole or even the dominant cause. We agree with Mr Fell that Parliament should be assumed to have legislated with an understanding that the common law readily recognises such an existence of concurrent causes. Putting the law to one side for a moment, it might also be expected to have legislated against a common sense understanding that very few (if any) events have a single cause. If Parliament had intended that relevant profits should result from tax arrangements and nothing else, we would have expected to see a stronger causal link articulated." (Blackfriars Hotel (UK) Holdings Limited v. HMRC [2024] UKFTT 1095 (TC), Judge Blackwell)
- Profits from book written about assisting an escape from prison not property obtained "as a result of" committing the offence
"Applying these principles in this particular context the words "as a result of" would appear to be intended to be distinguishable from "in connection with", although the possibility of some overlap need not necessarily be excluded. Giving all the words used their ordinary meaning, I unhesitatingly conclude that if the payments to the applicants fall into one or other of those two categories they fall into the category of property obtained in connection with the commission of the offences rather than as a result of them -- if only because the offences charged were committed in 1966 and the payments not received until over 20 years' later, in 1989 and 1990; and because the receipt of those payments is the direct result of the writing of the book and the applicants' contract with the publishers, two facts which, in my view, sufficiently break any chain of causation, between the commission of the offences (if they were committed) and the receipt of those payments, which would have to exist for anyone fairly to be able to say that the payments resulted from the offences." (Re R [1991] Lexis Citation 2748, Webster J)
- Calculate the profits the would have arisen without the tax arrangement to identify the profits as a result of those arrangements
"[65] The conclusion we have drawn from this exercise is that the correct approach to finding BHHL's relevant profits is not to try to isolate particular items (positive or negative) in the overall calculation of profit and in that way build up to a calculation of the relevant profits, "from the bottom up" as it were. In our view, the correct way to calculate how much of BHHL's profit has the tax arrangements as an efficient cause is to calculate what BHHL's profits would have been if the tax arrangements had not been implemented and compare that figure with BHHL's actual profits for the same period. Removing the effect of the tax arrangements in the alternative calculation of profits is consistent with our understanding of the purpose of section 730G (that companies should not be able to improve their position by participating in tax arrangements)." (Blackfriars Hotel (UK) Holdings Limited v. HMRC [2024] UKFTT 1095 (TC), Judge Blackwell)
Attributable to
- Capable of being attributed to rather than caused by
"[122] The third element is what is meant by damage being "attributable" in whole or part to the act or omission allegedly constituting negligence. The authorities establish that the word "attributable" means here "capable of being attributed", rather than "caused by": Guidera v. N.E.I. Projects (India) Ltd. (30 January 1990, CA Tr. No. 60 of 1990) per Sir David Croom-Johnson, Nash v. Eli Lilly at pp.797-8, per Purchas LJ and Dobbie v. Medway Health Authority at p.1240, per Sir Thomas Bingham MR..." (Haward v. Fawcetts [2006] UKHL 9)
- Some causal connection
"The fundamental problem is whether Mr Walsh's loss of employment was 'attributable to' any provision of the 1972 Act, ie the April 1974 reorganisation. These words have been considered in a number of cases and I do not wish to add to the explanations and definitions which have been given. Counsel for Mr Walsh submits that it is a wider concept than 'directly caused by', or 'caused by or resulting from', but he accepts that it involves some nexus between the effect and the alleged cause. He suggests that 'owing to' or 'a material contributory cause' or 'a material cause in some way contributing to the effect' may be synonyms. Lord Reid in Central Asbestos Co v Dodd ([1972] 2 All ER 1135 at 1141, [1973] AC 518 at 533) said:
'… “attributable“. That means capable of being attributed. “Attribute” has a number of cognate meanings; you can attribute a quality to a person or thing, you can attribute a product to a source or author, you can attribute an effect to a cause. The essential element is connection of some kind.'
Suffice it to say that these are plain English words involving some causal connection between the loss of employment and that to which the loss is said to be attributable. However, this connection need not be that of a sole, dominant, direct or proximate cause and effect. A contributory causal connection is quite sufficient." (Walsh v. Rother DC [1978] 1 All ER 510 at 514, Donaldson J)
Attributing value
- Attributing value transferred
On whether a transfer of value would be attributable to the land transferred or the business which the land formed part of
"[21] If it is relevant to choose the proper attribution of the value transferred by reference to the value of the business or by reference to the value of the land itself, then in my view the clearest and most natural attribution would be by reference to the value of the land itself rather than the business. When Mr Dance formed the intention to transfer the land into a trust settlement, his predominant intention was no longer to hold it for the purposes of using it in his business, but rather to hold it with a view to giving it to others by removing it from the assets used in his business. The transfer which he proposed to make was in no way made for the purposes of his business (he was not, for example, proposing to sell the land in a transaction to realise money for use in his business, as would be the case with a sale of stock in a trading business), but rather was to be made for the purpose of removing assets from his business with no corresponding benefit for his business. The process of designating the land to be included in the transaction and then giving instructions for the relevant documents to effect the dispositions in question amounted to a process of setting the land apart from his business in order then to transfer it to the Trustees, and the execution of the transfers in question was the culmination of that process and gave effect to his intention to treat the land as property apart from his business. Mr Dance thereby chose to treat the land separately from the farming business, as property with the simple character of land, and it would be appropriate to characterise the value transferred by the transfers of value as attributable to the value of the land qua land, rather than as attributable to it in its character as an asset used in Mr Dance's business." (HMRC v. Trustees of Nelson Dance Family Settlement [2009] EWHC 71 (Ch), Sales J)
- No exclusive attribution may be required
"[24] By contrast, the approach proposed by HMRC would involve a more complex and uncertain evaluative exercise to be undertaken, to decide whether to attribute the value transferred to a business or to some property used in the business. I do not think it is plausible to suppose that Parliament and the draftsman intended that there should be this additional layer of complication and uncertainty (requiring application of what is in effect a sort of metaphysical test of attribution) in the operation of the IHTA." (HMRC v. Trustees of Nelson Dance Family Settlement [2009] EWHC 71 (Ch), Sales J)
- Transfer of value/IHT attributable to both the property disposed of and property retained
"[32] ... In my view, the answer to this point is to observe that the tax may be attributable both to the value of property which is transferred and to the value of property which is retained by the transferor. This possibility is inherent in the approach to the construction of s. 104 which I think is correct, and to interpret s. 199(1) in this way does no violence to (but, rather, promotes) the purpose of that sub-section, which is to impose liability for the tax upon a range of persons who may be connected with the relevant transaction or property involved in it. Thus, in circumstances like the present case, but putting aside the question of BPR and assuming that the farmer transferor continued to carry on his farming business after the transfer of the land (e.g. using the land under licence, or using other land not transferred), I consider that both the farmer and the Trustees would be liable for the tax. The farmer would be liable as transferor, under s. 199(1)(a), and also under s. 199(1)(c) as the owner of the business, which the Act treats as property, and to the value of which the tax is attributable (since it is a change in the value of the business as property in the farmer's estate calculated according to s. 110 which gave rise to the taxable transfer of value). The Trustees would be liable under s. 199(1)(c), as persons in whom the land is vested, since the tax is also attributable to the value of the land (which was property in the farmer's estate, and the removal of which from his estate equally gave rise to the taxable transfer of value)." (HMRC v. Trustees of Nelson Dance Family Settlement [2009] EWHC 71 (Ch), Sales J - query whether this proves too much as the ToV is based on the whole estate before and the whole estate after)
- Transfer of value may be attributable to property even though that property is not changed or disposed of
"[28] ...(iv) Take the case where the 'relevant business property' in question is unquoted shares in a company (the type mentioned in s. 105(1)(bb)). Suppose Mr Dance had carried on his business through a trading company in which he held all of the (say) 100 issued shares, the company owning all the farmland and farm cottages. Suppose he had caused the company to issue 102 new shares of the same class directly to a child. The event would be treated (whether or not it was actually so) as a disposition by Mr Dance by s. 98 IHTA, and as a transfer of value by him under s. 3 IHTA. But the value transferred by the transfer of value would be plainly attributable to relevant business property, his shares being the only property in his estate which would be diminished in value by the transfer. So the transfer would plainly be eligible for BPR.
(v) The same result should apply if the company, with the shareholder's consent and at his direction, gave land away, for example, to the shareholder's child. Such a transfer by the company, because it was a "close company" would be treated as a transfer of value by the shareholder under s. 94 IHTA. The value transferred by the transfer of value would be attributable to the value of the land and if the Crown's argument were correct no relief would be available. But the value transferred would plainly be attributable to the value of the transferor's relevant business property since the only property in his estate which would be diminished in value by the transfer would be the shares. It would plainly be eligible for BPR." (HMRC v. Trustees of Nelson Dance Family Settlement [2009] EWHC 71 (Ch), Sales J)
By
- Requires causation, but consequence need not be immediate
"[92] I do not consider there is any mandate to import a temporal requirement into the subsection, requiring an immediate temporal link between the reduction in one estate and the increase in the other. There is a correlation of substance between the reduction and the increase, in that one results from the other, but they need not occur at precisely the same time. The use of the present tense upon which the appellants rely, does not dictate such a requirement. The present tense is used to identify two separate states of affairs which have to exist (“is diminished” and “is increased by”) but it does not follow that they have to exist at the same time or, putting it more exactly, one immediately following the other.
[93] That is not to say that questions of timing will be irrelevant to a determination of whether the subsection is satisfied. I agree with HMRC’s submission that, as with all questions of causation, the evaluation of whether “another person’s estate … is increased by the … omission to exercise a right” requires consideration of all the facts and circumstances. I turn therefore to look at the wider causation argument, bringing in the scheme administrator’s discretion." (Parry v. HMRC [2020] UKSC 35, Lady Black)
By reason of
- Limited trustee discretion not breaking causation between omission to take pension rights and death benefit accruing to children
"[94] In this case, the omission yielded the death benefits that, in fact, increased the sons’ estates and I do not see the limited discretion of the scheme administrator as breaking the chain connecting the two events. To say that it did would be to adopt a narrow and legalistic approach to section 3(3) which does not seem to me to be appropriate. Putting it another way, the omission was the operative cause of the increase. As Newey LJ observed (para 109, see para 47 above), it may be that the increase in the sons’ estates could also be said to be brought about “by” the exercise of the administrator’s discretion, but that does not preclude a finding that they were increased “by” the omission.
[95] My view is reinforced by the fact that section 3(3) requires only that “another person’s estate” is increased. It is not concerned with the identity of the other person. The benefits that were generated by Mrs Staveley’s omission to draw her lifetime pension were undoubtedly going to increase “another person’s estate”, even if the scheme administrator had not exercised its discretion in favour of the sons, but instead chosen others from the list within the scheme rules. To my mind, this adds weight to an interpretation of the subsection which results in the omission in this case being deemed to be a disposition, and it deals also with the practical problem which the appellants suggested arose. The persons liable for tax might not have been identifiable, but it would have been clear from the date of Mrs Staveley’s death that a charge to tax would arise by virtue of the omission." (Parry v. HMRC [2020] UKSC 35, Lady Black)
- By reason of connotes causation
"[52] In the alternative HMRC rely on s 171 IHTA 1984. The phrase "occurred by reason of the death", could alternatively be described as "as a result of" or "was caused by" and connotes causation: Financial Conduct Authority v Avacade Ltd [2021] EWCA Civ 1206; [2021] Bus LR 1810 at [76]. Section 171 is not limited to the specific examples given in HMRC's guidance (IHTM04046)." (Thomas v. HMRC [2025] UKFTT 1537 (TC), Judge Blackwell)
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)
"[80] At first sight, the answer to the question "is the outstanding replacement loan directly or indirectly connected with the relevant arrangement (which involved the remuneration of the contractor by payments to an EBT from which the loan was made)?" would appear to be "yes". The replacement loan comes into existence to discharge the Original DR Loan, which came into existence as part of the relevant arrangements. However, I accept that it is necessary to have regard to the purpose of the statutory provision in which the connecting factor appears when determining the nature of the connection required. On that issue, I was referred to a number of cases." (Reid v. HMRC [2025] EWCR 4, Foxton J)
- 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)
- Broad meaning when used to extend already broad words
"[19] I agree that the words of the indemnity, and in particular the connecting links contained in the relevant part of the clause, cover the facts of this case. The words throughout the clause are very wide and the connecting links expressed are themselves of increasing width, ending with the words "in connection with" which are widely regarded as being as wide a connecting link as one can commonly come across. In themselves they do not express the need for a causal connection, although of course they do express a need for a connection of some kind. That is the essence of the words "in connection with"." (Campbell v. Conoco (UK) Limited [2002] EWCA Civ 704)
"[64] The FTT correctly considered that the provision is to be construed broadly and the payment does not require ‘a close and strong nexus’ to the termination. As the Court of Appeal stated at [48] in Moorthy: The word 'otherwise' before 'in connection with' shows that the kinds of connection envisaged by the section must be wider than the specific examples given of payments and other benefits received directly or indirectly in consideration or in consequence of the termination of a person's employment (or a change in the duties of or earnings from that employment).”
[65] The final catch-all test within section 401 is provided by “otherwise in connection with”. The link between the payment and the termination can be broader than a standard causative link – otherwise these additional words would be otiose. It does not require a sophisticated or legalistic analysis of causation. This is also consistent with the Upper Tribunal’s decision in Colquhoun at [12] where the Upper Tribunal stated: “The statutory language of section 148(2) [the statutory predecessor to s401] has broadly been drawn. That can be seen from the use of words and phrases such as indirectly and otherwise in connection with. Otherwise may simply mean in any way and is consistent with the Parliamentary intention to catch a wide range of payments”." (Mathur v. HMRC [2024] UKUT 38 (TCC), Miles J and Judge Rupert Jones)
- May require causal link
"[55] In our view the Upper Tribunal [in Danvers] was stating here that there must be a causal link between the loan and a particular investment made by the pension scheme. It was not laying down any rule as to what might amount to a sufficient causal link in any particular circumstances. The answer to that question will involve a fact-specific assessment. In that case the FTT had found that the loan and the investment were "inextricably linked" and the Upper Tribunal held that there was ample evidence from which the FTT could properly reach that conclusion." (Foulkes v. HMRC [2024] UKFTT 322 (TC), Judge Cannan)
- May be very broad
"[113] As to the first of these points, I consider that the share sale was a "scheme transaction". The words "in connection with" in the definition of "scheme transactions" ("transactions…involved in connection with the disposal and acquisition") in s.75A(1)(b) are very broad: see for example the comment of Rix J in Campbell v Conoco (UK) Ltd [2002] EWCA Civ 704, [2003] 1 All ER (Comm) 35 at [19]: "the words 'in connection with' … are widely regarded as being as wide a connecting link as one can commonly come across". While it is the case that the Lease could have found its way into the Appellant's hands without the sale of the shares in B64, that is not the test. The scheme actually implemented had the share sale as an important component of the plan which vested the Lease in the Appellant." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588)
- Requires a relatively strong nexus where used alongside alternative limb requiring strong nexus
"[86] With the benefit of that guidance, I now turn to s.554A. The purpose of this provision, as noted in the Marlborough case, was to tax employment income provided through third parties The "relevant steps" are generally financial acts such as earmarking assets (s.554B), paying money, acquiring a right to money or an asset, releasing a loan or making money (s.554C) and assets (s.554D) available. In the case of paragraph 1(1), it is the continuing existence of a state of affairs – having an outstanding DR Loan or (on the current hypothesis) an outstanding replacement loan as at 5 April 1999 (Schedule 11 para. 1) – which generates the liability to tax. In my view, the statutory purpose of s.554A also requires a "relatively strong nexus" between the relevant step and the relevant arrangement, although I accept that the words "directly or indirectly" may well allow for there to be some intermediate stages between the relevant step and the relevant arrangement. That conclusion receives some support from the very strong and immediate connection contemplated by s.554(e)(i), and while sub-paragraph (e)(ii) undoubtedly contemplates a less strong and immediate connection, it is a sub-paragraph which will have the same broad statutory purpose as the immediately preceding sub-paragraph. The requirement for a relatively strong connection is also supported by the fact that both sub-paragraphs are to be approached for the purpose of ascertaining the position "in essence"." (Reid v. HMRC [2025] EWCR 4, Foxton J)
- "In connection with" may be satisfied by anything factually connects the to
"[71] A relevant aid to statutory interpretation in this case is the presumption that different words are used to denote a different meaning. If different words are used then the court has to do its best to find those different meanings: see Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), section 21.3.
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[80] Thirdly, regulation 28(3)(c) uses different words ("in pursuance of" and "in connection with" the arrangement) thereby indicating that they have different meanings. In pursuance of the arrangement has the meaning of providing funds under or in accordance with the arrangement whose object or effect is making restricted goods or restricted technology available to a person connected with Russia or for use in Russia. As the Court of Appeal held, at para 55, the use of the phrase "in connection with" in "conjunction with 'in pursuance of' indicates a clear intention to cast the net more broadly than financial services or funds provided under or in accordance with the terms of the relevant arrangements (which would be covered by the natural sense of 'in pursuance of')." I agree. The words "in connection with" are far broader than "in pursuance of". In conjunction with the phrase "in pursuance of" they mean anything which factually connects the provision of the funds to the arrangement. The phrase does not require there to be any causal connection." (Unicredit Bank GmbH v. Constitution Aircraft Leasing (Ireland) 3 Ltd [2026] UKSC 10)
- Profits from book written about assisting an escape from prison was property obtained in connection with committing the offence
"The next question, therefore, is whether those payments were connected with the commission of the offences or with the commission of the offences and some other matter? It is pointless to attempt to construe definitively in this or any other context the meaning of the words "connected with". But common sense would seem to lead almost inevitably to the conclusion, and certainly to the prima facie conclusion, that a book entitled (as this one is) "The Blake Escape. How we freed George Blake and why" is fairly to be regarded as connected with the commission of offences of aiding that escape and of conspiring to harbour and assist the escaper, unless it be shown, which naturally has not been attempted, that the apparent connection is misleading and that there is no connection whatsoever between the offences in question and the book or any payment for it. It was the commission of the offences by the applicants, if they are found guilty of them, that will have enabled them to write the book, and the payments were the result of writing the book." (Re R [1991] Lexis Citation 2748, Webster J)
In consequence of
- Proximately caused by
"[115] But it does not follow that the general law has no role to play. As noted earlier, it is common ground between the parties that the words "in consequence of" in the savings clause are to be interpreted as meaning "proximately caused by". The term "proximate cause" is used in insurance law to indicate that whether a loss is to be regarded as caused by an insured peril is a legal as well as a factual question. The relevant legal principles include principles concerning when voluntary conduct, such as the gratuitous conferral of a benefit, negatives causal connection. It is logical and common ground that the same principles that apply to causation of loss also apply to causation of gains. It can thus be said that such principles, recognised as part of the general law, have been imported by the language of the savings clause and are to be applied in determining whether savings from the receipt of a benefit were made "in consequence of" the insured peril. If they were, the savings clause requires them to be deducted." (Gatwick Investment Ltd v. Liberty Mutual Insurance Europe SE [2026] UKSC 14)
In respect of
- Services in respect of a person must relate to that person, not sufficient that the person paid for them
"[87(1)] (1) as regards Mr Nawbatt's first point, the phrase "in respect of" requires there to be a link between the investment management services which have been performed and the subject of those services, which is to say the person to whom the services relate. The person to whom the services have been provided or who may have paid for the relevant services is neither here nor there. What matters is the person to whom the services relate. This argument on the part of the Respondents equates the person receiving, or paying for, services to the person who is the subject of the services and therefore, in our view, fails adequately to take into account the phrase "in respect of"" (Millican v. HMRC [2024] UKFTT 618 (TC), Judge Beare)
- For services to be in respect of a person not enough that they benefit
"[87(2)] (2) a similar point may be made as regards Mr Nawbatt's second point. The mere fact that person A may benefit from a service supplied in respect of person B is, again, neither here nor there. In a group of companies, the ultimate parent company will inevitably benefit from a service which is supplied in respect of one of its subsidiaries but that does not mean that the service has been supplied "in respect of" the parent company (or, for that matter, to the parent company)." (Millican v. HMRC [2024] UKFTT 618 (TC), Judge Beare)
- Services in respect of an LLP not necessarily treated as in respect of members
"[87(3)] The first is that, when one looks at Sections 59 and 59A of the TCGA, their effects are:
(a) to treat assets held by a limited liability partnership as being held by the members of the limited liability partnership, for the purposes of tax in respect of chargeable gains;
(b) to treat dealings by the limited liability partnership for those purposes as dealings by its members and not by the limited liability partnership, as such; and
(c) to require tax in respect of chargeable gains accruing to the members of the limited liability partnership on the disposal of any of its assets to be assessed and charged on them separately.
None of those deeming provisions goes as far as suggesting that services performed in respect of a limited liability partnership should be deemed to have been performed in respect of its members." (Millican v. HMRC [2024] UKFTT 618 (TC), Judge Beare)
- Payment 'in respect of' looks to the real reason, not just what the documents say
"[55] In our judgment, these factual distinctions are irrelevant. Oliver J construed the relevant section, and then applied the facts to determine the result of the case. The key propositions to be derived from Vaughan-Neil, which are equally applicable to the construction of the material part of section 225, are as follows: i) Was the payment made “in respect of” or “for” the giving of the restrictive undertaking?
ii)This requires the court to consider the “real reason” for the payment.
iii) This question cannot be approached as one purely of construction of the deed. The critical question is: “What is the reality?”, and not simply, “What does the deed say?”
[56] In the circumstances, we accept the submission of Ms Nathan on behalf of HMRC that section 225 ITEPA 2003 is concerned with commercial, or “real world”, payments. The FTT was correct to reject the Appellants’ submissions that section 225 ITEPA 2003 should be widely construed given that it had been introduced to address the scope for wide scale avoidance created by the House of Lords’ judgment in Beak v Robson and there were indications that section 225 was not intended to be limited to commercially justified payments for restrictive covenants. Having rehearsed the arguments advanced by the Appellants ([44]), the FTT rejected them at [45], correctly noting that that there was no reason Parliament would have moved away from its usual approach of requiring a real-world connection between the payment and the giving of the restrictive undertaking. Ms Nathan observed, in our view with justification, that any other construction of a section intended to counter one form of avoidance would open the door to another form of avoidance such as that perpetrated by the Appellants." (The First de Sales Limited Partnership v. HMRC [2018] UKUT 396 (TCC), Henry Carr J and Judge Sinfield)
- Distribution by a company designed to reach shareholders as a result of a series of steps is in respect of their shares
"[31] It follows that the answer to the first stage of the enquiry is that "distribution … in respect of shares" is, on a purposive construction of the statute, wide enough to include a distribution by a company which is designed to reach, and does reach, the company's shareholders even if it does so as a result of a series of steps. That is the "class of facts intended to be affected by the charge". The second stage of the enquiry is to discover whether the relevant facts fall within that class, in the sense that they "answer to the statutory description". That is straightforward enough. The distribution by Winn Yorkshire, was, as to some 98.5% of the sum distributed, designed to reach, and did reach, the Appellants (its shareholders). It therefore answers the statutory description." (Clipperton v. HMRC [2024] EWCA Civ 180, Nugee, Lewison, Newey, LJJJ)
On
- "On" retirement requires retirement to be the trigger
"In context, and indeed on the ordinary and natural reading of the words, subsection 1(5) is defining the circumstances in which a scheme provides for benefits to be provided. The key word is "on". To be a pension scheme within the meaning of section 1(5), the scheme must provide, or be capable of providing, benefits to people "on retirement" or "on termination of service" not during, or after, or coincident with, retirement or termination of service. The occurring of one of the events specified in section 1(5)(a) to (c) must be the event, or the trigger, giving rise to the entitlement to benefits. That conclusion is reinforced by the use of the word "on" in section 1(5)(b). A scheme will be a pension scheme if it provides benefits "on a person having reached a particular age". It is clear that having reached the particular age is the event which gives rise to the entitlement to benefits." (Clark v. Chief Constable of Derbyshire [2024] EWCA Civ 676, Lewis, Underhill, Warby LJJ)
On (expenditure "on" X)
- Requires a closer connection than "in connection with" or "relating to"
"[74] Looking first at the ordinary meaning of the words used in the context of section 11(4)(a), I agree with the Upper Tribunal that the requirement that the expenditure must be "on" the provision of plant indicates a narrow test, requiring a close connection between the expenditure and the plant provided. There are many statutory provisions in relation to tax and other topics that use other phrases to connote a much looser nexus such as "in connection with" or "relating to" or "with a view to". Those phrases do not mean the same as "on". Parliament has used a different test here and, in my judgment, it requires a close connection.
...
[85] In my judgment therefore, the ordinary meaning of the requirement that the expenditure be "on the provision" of the plant connotes a close connection between the expenditure and the plant." (HMRC v. Orsted West of Duddon Sands (UK) Limited [2026] UKSC 12, Lady Rose)
- Necessity of expenditure to achieve the purpose not required
"[75] [The taxpayer] contrasted the wording here with that used in section 336 of the Income Tax (Earnings and Pensions) Act 2003. That imposes a strict test for deductions by employees for expenses when computing income tax because the expense must be "wholly, exclusively and necessarily incurred" in the performance of the duties of the employment. He said that the link in section 11(4)(a) does not deploy any of those restraints and so a looser link is intended. I do not accept that that is a helpful comparison. It is accepted by HMRC that in order to qualify under section 11(4), the expenditure does not have to be the bare minimum that needs to be expended on providing the plant in order for it to qualify for an allowance. An item of plant acquired by the business can qualify even if it could be described as a "nice to have" rather than a "must have" for the business. That is why the Upper Tribunal disagreed with the FTT's necessity test which rejected studies which improved the windfarm but where the windfarm would have generated electricity even without that change." (HMRC v. Orsted West of Duddon Sands (UK) Limited [2026] UKSC 12, Lady Rose)
Referable
- Fact that a factor is an ingredient in calculating a sum does not mean sum is necessarily referable to it
"[44] The second point is that there is a distinction between referability and computation. The fact that a particular factor (such as the fair value of the loan notes at a particular point in time) may be an essential ingredient in computing whether a loss has arisen does not mean that the loss is necessarily referable to that matter." (UK Care No.1 Limited v. HMRC [2024] UKFTT 542 (TC), Judge Robin Vos)
- Loss already latent in asset at time of migration referable to pre-migration period
"[117] Leaving aside the question of intention which, as I have said, I do not consider to be relevant, it follows from what I have already said that the decision to redeem the loan notes early therefore simply crystallised losses which already existed as a matter of commercial reality at the date of migration with the exception of the penalty element of the premium (which only came into existence as a result of the decision to redeem early). The whole of the remaining amount (subject to what I say below about the unamortised issue expenses) is therefore referable to the pre-migration period." (UK Care No.1 Limited v. HMRC [2024] UKFTT 542 (TC), Judge Robin Vos)
"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)
Represent
- Assets of company do not represent shares in company
"[24] It seems to me that the effect of these provisions is that the appellant could only properly be treated as a settlor in relation to the Sagittarius Settlement if it can be said that part of the property held on the trust of the Sagittarius Settlement was provided by him, or represented property provided by him. The appellant argues that he could not be treated as a settlor in relation to the settlement, because no part of the settled property, held on the trust of the settlement, was provided by him or represents property provided by him. The only relevant property provided by him was the £700,000 provided by him to enable Rose Lodge to purchase the farm. The land disposed of by Rose Lodge on 16 August 1995 admittedly represented the £700,000 provided by the appellant, but (submits the appellant) that land was not held on any trust arising under the Sagittarius Settlement. It was the absolute beneficial property of Rose Lodge.
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[29] I accept the appellant's submission that the land disposed of by Rose Lodge was not settled property originating from the appellant as settlor, because it was not at any stage held on the trust of the Sagittarius Settlement and did not represent property ever held on those trusts. It follows that (in my judgement) there was no disposal within section 86(1)(e) of the 1992 Act, so that the assessment was made on a false basis." (Coombes v. HMRC [2007] EWHC 3160 (Ch), Sir Donald Rattee)
"The Inland Revenue had a charge under s 237(1) on the company's shares which Sir Charles had settled on himself for life, and under s 237(2) on 'any property directly or indirectly representing' those shares. They argued that s 237(2) must be read as extending the charge to the underlying assets of the company.
Vinelott J was not persuaded that this was a tenable construction. In his judgment subs (2) was not intended and was not apt to create a double charge in such circumstances. The word 'indirectly' was used in subs (2) to make it clear that the charge extends not only to the proceeds of sale of property subject to the charge and to property purchased with those proceeds (which may be said to represent that property 'directly') but also to any property into which the property subject to the charge or the proceeds of sale can be traced." (CIR v. Stype Investments (Jersey) Ltd (1987) CTTL 26 - no report, but HMRC also refer to it at IHTM28013).