© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Certainty and finality
Finality: presumption against HMRC having open ended time to assess
"[21]...Thirdly, the cure which HMRC proposes for dealing with this problem, if it is one, seems to me to be a great deal worse than the disease. If the charge to tax were to be treated as arising at the date of assessment, it would follow that the chargeable period would be wholly at the discretion of the Revenue. That result, surprising enough in itself, would lead to the even more surprising conclusion that a charge to tax could be imposed without limitation any number of years after the facts which justified it." (John Mander Pension Trustees Limited v. HMRC [2015] UKSC 56, per Lord Sumption)
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Legal certainty
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- Presumption that the law in place at the time of the material events applies
"[66] In our judgment the Court of Appeal in Lipton fell into error in holding that it was the amended version which governs the Liptons' claim. This is contrary to a basic principle of the rule of law which Parliament must be taken to respect, according to which it is the law in place at the time the material events occur which applies, rather than some different version introduced at a later date. To analyse the position as the Court of Appeal did would produce strange results and would undermine the important value of finality in litigation. It would mean that the relevant law applicable to two identical cases which occurred on the same date might be different, depending on the time at which the relevant claims were brought and the vicissitudes of listing hearings in the respective courts in which the proceedings were commenced. It might also encourage parties to continue litigation even if the court at first instance had been completely correct in understanding the law which it was its task to apply to the case and had committed no legal error." (Lipton v. BA Cityflyer Ltd [2024] UKSC 24)
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- Interpretation that makes operation of tax depend on acts of others not a sufficient objection
"[53] Mr Henderson submitted that the Appellant's approach would lead to unacceptable uncertainty. An SDLT return must be filed shortly after a transaction is undertaken. The taxpayer could not know at that stage whether a group relief claim by the vendor would or would not succeed, or whether it might be withdrawn.
[54] I am unpersuaded by this. Like other tax returns, SDLT returns are not made with a guarantee of their accuracy; they are made on the basis of a declaration that the return is "to the best of [the purchaser's] knowledge, correct and complete" (paragraph 1(1) of Schedule 10 FA 2003). There is also provision for them to be amended within 12 months of the filing date (paragraph 6 of Schedule 10). Even on HMRC's approach the company making the return must ascertain whether the vendor either has made or intends to make a group relief claim, a claim which would not necessarily be filed before the company makes its own return and indeed might be made by way of amendment to the vendor's own return at a later date. The fact that, on the Appellant's approach, the company needs additional information to ascertain whether the claim made by the vendor is one that will succeed, or indeed is withdrawn, is no different to many other situations where a group member's own tax position is affected by that of other group companies. (There are numerous example of this, but an analogous one that I mentioned at the hearing is the fact that returns of chargeable gains will need accurately to take account of the tax history of assets acquired from other group members, in particular whether and what reliefs have successfully been enjoyed – including via claims that may be made at a later date – because that may fundamentally affect the tax treatment of the sale of those assets.)" (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588, Falk LJ)
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Retrospectivity: presumption against
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- Applies to completed transactions
"[101] [The taxpayer] submitted that this conclusion means that the legislation is retrospective but we do not agree. We agree with [HMRC] that the presumption against retrospective legislation addresses the impact of legislation on transactions which have already happened. There are numerous instances of legislation changing the tax treatment going forward of existing arrangements and on occasions with no, or very limited, grandfathering. This is in the very nature of anti-forestalling provisions." (Ferguson-Davie v. HMRC [2024] UKFTT 321 (TC), Judge Bowler)​
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- Apportionment not implied
"[102] [Counsel for the taxpayer] raised at the hearing that we could consider the possibility of apportionment. She submitted that to the extent that an amount of carried interest arises partly in connection with the disposal of assets before July 2015, and partly in connection with a disposal of assets after July 2015, there is no conceptual difficulty with apportioning the amount so as only to carve out the proportion that arises in connection with the disposal of assets prior to July, and the rest would then be subject to the new regime.
[103] We decline to follow this approach despite its apparent attractiveness as an ostensibly fair way of applying the new regime. We recognise that the courts have at times interpreted legislation as permitting apportionment without clear language to that effect. However, we are not inclined to do so in this case for the following reasons:
(1) the draftsman has used apportionment wording within the new regime provisions in s103KA(4) stating that s103KA(2) and (3) do not apply "to the extent that" carried interest is brought into account in taxing the recipient to income tax on profits of a trade or the carried interest constitutes a co-investment repayment or return. There is no reason why the draftsman would use such wording in s103KA itself for particular purposes and then fail to use it in s43(2) if apportionment was envisaged;
(2) as [HMRC] identified, the Explanatory Notes state that "When carried interest arises on or after 8th July 2015 the gain will normally be equal to the sum received." There is no suggestion that there was any intention for there to be apportionment, or for the new rules to apply to only part of the carried interest that arises after 8th July 2015; and
(3) as a practical matter in this case we struggle to see on what basis the apportionment would take place. All of the profits were generated by the pre-8 July 2015 disposals so apportionment based on profit achieves no more than saying that in fact the Carried Interest Amounts arose in connection with those earlier disposals." (Ferguson-Davie v. HMRC [2024] UKFTT 321 (TC), Judge Bowler)​
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- Statutory power may be exercised retrospectively in the absence of express wording
"[52] Looking just at the narrow question before us,
(1) There is no limit in the language of section 165(3) on the circumstances in which HMRC can agree to a non-standard accounting period.
(2) Hoey indicates that there is no need for a provision such as section 165(3) to state expressly that an agreement under it can operate retrospectively before that is permitted.
(3) Section 165(3) allows HMRC and a bookmaker to agree a non-standard accounting period. Except for circumstances where HMRC's refusal to agree a non-standard accounting period could be subject to a successful challenge on public law grounds, such as those outlined in the quotation from Beehive Stores set out in [4] above, the provision does not allow one party to force a non-standard accounting period on the other. That is the safeguard of fairness for both parties.
[53] On this basis, we can see no reason not to give the words of the statute their plain and ordinary meaning. This is sufficient for us to conclude that HMRC have power under section 165(3) FA 2014 to agree to a non-standard accounting period with retrospective application." (Betindex Limited v. HMRC [2024] UKFTT 222 (TC), Judge Baldwin)
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Principle against doubtful penalisation
"[58] While Mr Fitzpatrick denied that the principle against doubtful penalisation had any relevance in this case because, on his submission, the meaning of the statute was clear in permitting an RRO against a superior landlord, he did not dispute Mr Morris’ submission that an RRO is a relevant penalty for the purposes of the principle. And it has been held that the principle against doubtful penalisation extends to the imposition of civil liability linked to a crime (see Ess Production Ltd (in administration) v Sully [2005] EWCA Civ 554, [2005] 2 BCLC 547, para 78). In our view, although unnecessary to rely on it, the principle against doubtful penalisation is a further factor supporting the straightforward interpretation set out above." (Rakusen v. Jepsen [2023] UKSC 9)
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"[106] Both parties referred briefly to the rule against doubtful penalisation with Mr Sherry submitting that its application should lead us to adopt a narrower rather than a wider interpretation of the words “due to” if more than one interpretation were possible; see Agassi v Robertson [2004] EWCA Civ 1518 at [30] per Buxton LJ. Ms Choudhury argued that the rule did not apply because the submission on behalf of Delphi was that at its highest, “but for” causation was a tenable construction.
[107] It is clear that the rule, which is one of statutory interpretation, applies to civil penalties: ESS Production Ltd (In Administration) v Sully [2005] EWCA Civ 554, per Arden LJ at [78]. In R(OAO the Good Law Project) v Electoral Commission & Ors [2018] EWHC 2414 (Admin) at [34] (Leggatt LJ and Green J) the rule was summarised as follows: “If there is a reasonable interpretation which will avoid the penalty in any particular case, we must adopt that construction. If there are two reasonable constructions, we must give the more lenient one. That is the settled rule for the construction of penal sections” (Tuck & Sons v Priester) (1887) 19 QBD 629).
[108] We consider that our interpretation, following Mainpay CA, of the phrase “due to” would be more consistent with the application of this rule of interpretation than the wider “attribution/mode of behaviour” meaning adopted by the FTT." (​Delphi Derivatives Limited v. HMRC [2026] UKUT 21 (TC), Marcus Smith J and Judge Brannan)
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