© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H13. Miscellaneous words and phrases
Business
- Lack of activity may rebut presumption company carrying on business
"[139] More fundamentally, a strong presumption or inference that a company is carrying on business does not mean that it necessarily is. Ultimately, GEFI's position is that because the LP held some very large loans GEFI must therefore be taken to have been carrying on business. That does not follow. A multi-factorial evaluation is required: it all depends on the particular facts. For example, in American Leaf Lord Diplock laid stress not only on the lettings themselves but on related activities such as negotiations with different tenants and the removal of machinery. As these additional activities rather illustrate, there may well be a qualitative difference between what is involved in letting property to tenants and simply receiving an income stream from loans. In South Behar the company in question had at its risk funded the construction of a railway by agreement with the Secretary of State, and the income in question arose from a later agreement under which the Secretary of State took over the operation of the railway in exchange for an annuity rather than the previously agreed share of earnings. The decision was that the company still carried on its railway-related business. That is important. It was not a decision that it had a new business of earning annuities. In Korean Syndicate the company was formed to acquire, work and turn to account mining concessions. It acquired a large concession in Korea but, after considering working it itself, ultimately contracted with another entity to exploit it in return for a percentage of profits. Lord Sterndale MR expressly distinguished the company's objects from the case of "a person who holds certain investments and merely draws the interest from them, or of an owner of mines who simply leases them in consideration of the payment to him of royalties" (p.272).
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[144] This conclusion does not involve any material error of law. In essence, the LP acted merely as a passive holding vehicle for some loan receivables. Their size makes no difference: the test is a qualitative one. The board of GEFI Inc, as the LP's general partner, did not make strategic decisions and in fact had "very little involvement" ([90]). While the involvement of GE's tax department was neither surprising nor a reason to treat the LP's activities as somehow being "denatured" from being a business as a result of any tax motivation (which would be an incorrect approach), the FTT made no such error. It was fully entitled to focus on the lack of activity by the general partner in reaching its evaluative conclusion." (HMRC v. GE Financial Investments [2024] EWCA Civ 797, Falk, Arnold, Whipple LJJ)
- Business per se not readily treated as a form property, but can be referred to as such
"[38] (It is not necessary for present purposes to resolve the following small point which arises on the interpretation of s. 237, since it is not a critical point in terms of the interpretation of s. 237 generally and for the explanation of its operation compatibly with the Trustees' interpretation of s. 104(1). However, I should observe that this analysis of the operation of s. 237 on the facts postulated in paragraph [37] above assumes that the "property" in s. 237(1)(a) which may be made subject to a charge includes a business, albeit that a business is not in terms of the general law itself property of a form which is readily or usually made subject to a charge. So far as that is concerned, it may be said that the IHTA generally treats a business as a form of property, and one can have a sale of a business, so that it seems it would be conceptually possible to envisage a charge over the proceeds of sale of a business. Hence it is quite possible – and I think likely - that the draftsman contemplated that such a charge in relation to a business may arise under s. 237(1).)" (HMRC v. Trustees of Nelson Dance Family Settlement [2009] EWHC 71 (Ch), Sales J)
Claimed
- Means correctly claimed
"[58] Turning back to the correct interpretation of s.53(4)(b), I would accept Ms Shaw's submission that the word "claim" should be given a purposive interpretation. Just as in Rossendale the words "the person entitled to possession" within the meaning of s.45(1)(b) of the Local Government Finance Act 1988 could not be taken to include a company with no real or practical ability to exercise its right to possession, so too "a transaction in respect of which group relief was claimed by the vendor" cannot be taken to include a transaction which does not in fact qualify for group relief and which has not enjoyed the benefit of group relief. This approach properly addresses the mischief at which the proviso is aimed, namely a circumvention of paragraph 3 of Schedule 7, and achieves its purpose. If the earlier transaction did not qualify for group relief, the correct approach is to levy tax on that earlier transaction." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588, Falk LJ)
- Query the position if group relief wrongly claimed but claim not reversed
"Further, and as Ms Shaw submitted, HMRC's failure to assess B64 is a failure in HMRC's own decision-making and assessment process, rather than one that is properly remedied by the interpretation of s.54(4)(b) that HMRC now urge on the court. HMRC are no doubt out of time to assess B64 to SDLT, but it was their choice not to do so (including by way of alternative to their original analysis), and it was their error to proceed solely on the basis that sub-sale relief was available. There are time limits for assessment with good reason, and they cannot be circumvented by a construction of the charging provisions that is not otherwise justified." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588, Falk LJ)
- "Exchange" refers to the whole exchange, not part of it
"The exchange was simply the share transactions agreed between the commercial parties. In this case, the exchange was the issue of ordinary and preference shares in Diamond in exchange for Euromoney's shares in Capital Data and Capital Net. It was neither necessary nor appropriate to consider the reasons or motives for the exchange when identifying the transaction itself. That analysis, one might note, works as well for a reconstruction or an amalgamation as it does for an exchange." (Delinian Limited v. HMRC [2023] EWCA Civ 1281 Vos, Snowden, Whipple LJJJ)
For
- Agreement "for...the carrying out of construction" must have construction as object (does not include collateral warranty)
"[70] For all these reasons, I consider that a collateral warranty will not be an agreement "for" the carrying out of construction operations for the purposes of section 104(1) if it merely promises to perform obligations owed to someone else under the building contract. There needs to be a separate or distinct obligation to carry out construction operations for the beneficiary; not one which is merely derivative and reflective of obligations owed under the building contract. This is what I understand Stuart-Smith LJ to mean when he speaks throughout his judgment of the need for a "direct" contractual obligation. This does not prevent the collateral warranty overcoming the difficulty arising from Murphy v Brentwood District Council referred to earlier." (Abbey Healthcare (Mill Hill) Ltd v. Augusta 2008 LLP [2024] UKSC 23)
Exchange
Held
- Benefit of contractual promise not held under arrangement
"[72] Finally, we do not consider that pursuant to the arrangements "property is held, or may be used, under an employee benefit scheme". The only "property" suggested by Ms Murray was the contractual promise made by the Appellants. In our view such a promise is not "held" by a director to whom the promise is made "under" the employee benefit scheme (assuming for this purpose that there is such a scheme) for similar reasons to those of the Supreme Court in relation to the options in NCL SC. Rather, it is simply a term of the contractual arrangements and is not properly described as property "held...under" the arrangements. This follows from the other reasons, described above, why we consider that section 1290 does not apply on the facts of this case." (A D Bly v. HMRC [2024] UKUT 104 (TCC), Judges Thomas Scott and Greenbank)
- Includes via a connected company
"[51] Contrary to the way in which the UT understood his argument, Mr Birkbeck does not suggest that the consideration indirectly provided by C is restricted to consideration that C is contractually bound to provide. His essential point is that consideration provided by C (here Mr and Mrs Brown) under the original contract between A and B (here Mr Hamm and Earlswood) must be C's money. Where B is a company funding the A/B purchase with its own money it is B who gives the entirety of the consideration; and it does not matter how B has raised the money. What C got by subscribing for shares was the shares themselves, and the subscription monies were no longer C's but became B's.
[52] In my judgment, while this argument may prevent the conclusion that the consideration under the notional contract was given directly by Mr and Mrs Brown, it does not undermine the UT's conclusion that it was given by them indirectly...
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[56] I agree. In short, I also agree with the way the FTT put it in Vardy, and with the UT's view of the facts at [62]. I do not attempt to circumscribe the outer limits of what might properly be described as consideration under the original contract indirectly given by someone who is not a formal party to it. As Mr Elliott submitted, that is a fact-sensitive question. The facts with which we are concerned involve the provision of funds to a wholly owned vehicle, for the sole purpose of buying a particular identified property at an identified price, with the ultimate objective that the property would be vested in the persons providing the funds simultaneously with completion by the sale contract. Indeed, the bulk of the funds were provided after the contract was made. All this was done under a pre-ordained scheme with no purpose other than the avoidance of SDLT." (Brown v. HMRC [2024] EWCA Civ 92, Lewison LJ)
Indirectly
- "Property" of trust means net property
"[35] In St Barbe Green, the deceased’s “personal” estate (as opposed to his interests as life tenant under certain trusts) had more liabilities than assets i.e. it was insolvent. The issue in the case was whether the excess of his liabilities over the assets in his personal estate could be used to reduce the value of the assets in the trusts (that fell to be part of his estate per s49(1)). The trustees argued that the effect of s5(3) was that the free estate was to be aggregated with the settlements, so that the balance of the free estate was available to reduce the assets in the trusts. It was held that the net liabilities were not available to reduce the estate beyond the value of the personal estate’s assets that were liable to meet them.
[36] At [12], Mann J stated that “the property” in s49(1) must mean “net property” in the sense of the value of the property net of trust liabilities; as he put it, we have in s49(1) the notion of property from which liabilities have been notionally deducted. The judge said that the same notion can be applied in s5(1) (which refers to the aggregate of all “the property” to which someone is beneficially entitled i.e. like s49(1), it refers to “the property”)." (Pride v. HMRC [2023] UKFTT 316 (TC), Judge Citron)
Property
STATUTORY NUGGETS
- May mean 'even where' or 'only where'
"[61] The above statutory examples demonstrate that "despite the fact" can mean "even where" but they do not establish that it cannot mean "where" if the context so requires. It is therefore necessary to consider the context to determine what is meant by these words in subsection (6).
[62] In the legislation in paragraph [60] above, to which [the taxpayer] referred, the words from "despite the fact" offer helpful clarification that the circumstances set out in the second part of the sentence, do not disapply the first part, when it might be thought that they could. They therefore have the purpose of removing a potential ambiguity. This is not the case in subsection (6). There is no reason to consider that a company that can lawfully distribute Return of Share Capital by way of a dividend would not be included in the first part of the subsection and so the words from "despite the fact" would have no purpose if "despite the fact" meant "even where".
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[67] For all the reasons set out above, we find that the words "despite the fact" in subsection (6) mean "where" and therefore have the effect of limiting the circumstances where Returns of Share Capital do not count as assets in subsection (2) to where such assets are lawfully distributable by way of dividend. We agree with the FTT interpretation of these words at paragraph [70] of its decision in Osmond (as quoted at paragraph [48] above) and find that the reference in subsection (6) to subsection (2) rather than subsection (4) does not change that interpretation." (Hunt v. HMRC [2025] UKFTT 538 (TC), Judge Snelders)
Despite the fact that
Includes
- Could be inclusive or exhaustive definition
"The word "include" is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word "include" is susceptible of another construction, which may become imperative, it the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to "mean and include," and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act must invariably be attached to these words or expressions. Their Lordships have come to the conclusion that it is not necessary for the decision of this appeal to determine in which of these senses the word "include" is used in s 2. They are willing to assume, and will accordingly assume, that the word was meant to introduce an exhaustive definition..." (Dilworth v. Commissioner of Stamps [1895 - 99] All ER Rep Ext 1576 at 1579 - 1580, PC)
Means
- Sets out all requirements that must be met
"[53] ... I also note that the use of the word 'means' in this provision indicates that the definition should be 'construed as comprehending that which is specifically described or defined' and thus as setting out all requirements that must be met to be considered a resident under the Treaty (R v Hauser [1979] 1 SCR 984 at 1009, per Dickson J; see also R v McLeod (1950) 97 CCC 366 (BCCA), at 371–372, quoting Dilworth v Comr of Stamps [1899] AC 99 at 105–106, [1895–99] All ER Rep Ext 1576 at 1579–1580 (PC))." (Alta Energy Luxembourg SARL v. R (2021) 24 ITLR 346, Supreme Court of Canada)
- "Or" can mean "and"
"[125] I cannot accept this. The word "or" can be used in an inclusive sense (see generally Bennion at 17.11); it all depends on the context. It is highly unlikely that Parliament intended to allow the provision to be avoided by ensuring that some consideration was received by V and the remainder by a connected party. The more natural interpretation is that, in context, Parliament intended to catch the receipt of consideration whether by V, by connected parties or by both. I note that this is also consistent with the approach that has been taken in another part of the SDLT code using similar language: see Fox v Revenue and Customs Comrs [2022] UKUT 310 (TCC), where the expression "consideration…given…by the transferee or a person connected with him" in s.45 FA 2003 (as then in force) was interpreted to include consideration given both by the taxpayer and by his wife." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588)
Or
Reasonable to suppose
- Time to assess: at the outset
"[60] First the statutory question is not of course whether the use of an asset to provide accommodation for offshore workers was in fact incidental to another use of the asset, but whether it is "reasonable to suppose" that its use to provide such accommodation "is unlikely to be more than incidental" to another use or other uses to which the asset "is likely to be put". One of the questions raised in argument was when this statutory question has to be addressed: at what date does it have to be reasonable to suppose that one use is unlikely to be more than incidental to another? Mr Ewart's answer was that this is to be addressed at the outset of the relevant accounting period. In the present case there were two accounting periods, one from 1 April 2014 to 31 December 2014, and the other from 1 January 2015 to 31 December 2015, so on this view the question would be posed as at 1 April 2014 and 1 January 2015. Ms Shaw's preference was for the end of the relevant accounting period(s) and so in the present case 31 December 2014 and 31 December 2015. I do not think anything actually turns on this in the present case, but I prefer Mr Ewart's answer. The wording requires an objective assessment of the likelihood of something being the case, and it seems to me more natural to read this as referring to an assessment at the outset of an accounting period of the likelihood that something would be the case in the future rather than an assessment at the end of an accounting period of the likelihood that something was the case in the past. This might make a difference in some cases, although I do not find it easy to envisage the circumstances in which it would, or to understand why the legislation is drafted that way. But here the contract was up and running, and the Borgsten had been in position alongside the Dunbar and providing services to it for over a year before the legislation applied, and there was no reason to suppose that it would not continue to carry on in accordance with the contract, which is indeed what it did. In those circumstances I do not see that there would have been any material difference between what would objectively have been thought likely to be the case in April 2014 (or January 2015), what would objectively have been thought likely to have been the case in December 2014 (or December 2015), and what actually happened." (HMRC v. Dolphin Drilling Ltd [2024] EWCA Civ 1, Nugee, Jackson, Newey LJJJ)
- T's assessment only displaced if unreasonable (according to HMRC)
"The individual will know their purpose and, if fairly described, can be confident that there will be enough supporting evidence (“having regard to all the circumstances”) for an officer to arrive at a sound conclusion when applying the test of whether it is ‘reasonable to assume’ that a main purpose of the winding up or the wider arrangements was the avoidance or reduction of a charge to income tax. The individual should self-assess on that basis. HMRC can only displace this self-assessment where the individual’s decision is not reasonable." (CTM36340)
- Test of purpose is still subjective (according to HMRC)
"The purpose test is subjective but the purpose may be inferred from objective characteristics having regard to all the circumstances surrounding the winding-up to which the test is being applied, much as Lord Brightman was able to draw an inference in a different context. In Mallalieu v Drummond (1983) 57 TC 330 he was able to distinguish between the motive the barrister asserted of maintaining a wardrobe of a certain type and standard, and the object or purpose of the purchase of it." (CTM36340)
So far as not included
- Does not necessarily imply Parliament had in mind circumstances in which it would be included
“It is right that the draftsman wished to cover the possibility that an amount falling within amount A might also fall within amount B and thus inserted a provision precluding double-counting. The fact that he wished to do so does not, however, demonstrate that he had in mind actual circumstances in which this might occur. He may well have included the exclusion out of caution.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §70, Warren J).
- Implies a result that would not otherwise be the case
"The vital words for the present purpose are, in the proviso, “as if the trade … had been discontinued at the date of the change and a new trade … had been then set up or commenced,” and in subrule (2) “as if it had then been discontinued.” These phrases clearly indicate that in the view of the legislature there is no real “discontinuance” of a business..." (IRC v. Barr [1954] 1 WLR 792 (HoL) at 798)
“It is to be noted that these profits are not “to be treated” as included but are actually included. This indicates that the word “contribution” in this context subsumes capitalised profits, a meaning which I consider to be a perfectly normal interpretation of the word.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §68, Warren J).
Treated as
Unless otherwise provided
- Requires an express disapplication
"[82] [HMRC] submitted that the reason the point had never been argued or determined in other cases was that it was obviously wrong. The proviso in s.42(1) is not engaged by implication or by inconsistent other statutory provisions – just as paragraph 2(3), Schedule 1B TMA applies even though it provides for an inconsistent outcome to s.574(1)(a) & (b) ICTA. The proviso phrase 'unless otherwise provided' in s.42(1) TMA is only engaged if there is express disapplication by a provision within the TMA or other legislation. Mr Carey gave two examples of other provisions by which s.42 TMA has been expressly excluded from applying to that legislation: s.201(5) of the Capital Allowances Act 2001 and reg.12(1) of The Registered Pensions Schemes (Relief at Source) Regulations 2005.
[83] We are satisfied that the proviso phrase 'unless otherwise provided' in s.42(1) TMA, requires an express statutory provision that s.42 is to be disapplied. It is not disapplied by implication. S.42(1) provides that s.42(11A), and hence Schedule 1B TMA, is to apply to the Taxes Acts, unless otherwise provided." (Murphy v. HMRC [2025] UKUT 165 (TCC), Richard Smith J and Judge Rupert Jones)