A9. Definitions in legislation

Ordinary meaning of the term being defined is relevant

"[48] In an appropriate case “the potency of the term defined” may provide some guidance as to the meaning for that term as set out in a statutory definition. As it is put in Bennion, Bailey and Norbury, op. cit., section 18.6: “In the case of a statutory definition the defined term may itself colour the meaning of the definition”. Lord Hoffmann explained in MacDonald v Dextra Accessories Ltd [2005] 4 All ER 107, para 18, “a definition may give the words a meaning different from their ordinary meaning. But that does not mean that the choice of words adopted by Parliament must be wholly ignored. If the terms of the definition are ambiguous, the choice of the term to be defined may throw some light on what they mean”. I agree with Henderson LJ, paras 92-93 (citing Birmingham City Council v Walker [2007] 2 AC 262, para 11, per Lord Hoffmann, and Oxfordshire County Council v Oxford City Council [2006] 2 AC 674, para 38, per Lord Hoffmann, and para 82, per Lord Scott of Foscote), that this principle is not confined to cases where there is an ambiguity in the terms of the definition, but means that when the definition is read as a whole the ordinary meaning of the word or phrase being defined forms part of the material which might potentially be used to throw light on the meaning of the definition. Whether and to what extent it does so depends on the circumstances and in particular on the terms of the legislation and the nature of the concept referred to by the word or phrase being defined." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)

"[125] HMRC go on to submit that the mere fact that the overall profits may cap the remuneration does not convert a mechanism which is broadly typical of an employee's salary plus bonus into one that is typical of a sharing of profits between partners. Even an employee's salary is ultimately dependent on the ability of the employer to pay it. In using the term "disguised salary" Parliament was intending to capture methods of remunerating LLP members which are akin to salary in an employment context, and the use of the word "salary" may legitimately colour the meaning of the term defined: see R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28, [2023] 1 WLR 2594, at [48] and (in a tax context) MacDonald v Dextra Accessories Ltd [2005] UKHL 47, [2005] 4 All ER 107, at [18] per Lord Hoffmann." (HMRC v. Bluecrest Capital management (UK) LLP [2025] EWCA Civ 23, Henderson, Lewison, Arnold LJJ)

"[68] As the Court of Appeal observed in NCL CA, a literal reading of section 1291(1) would be capable of including the grant of an employee share option, but such a reading would ignore the context created by section 1290: NCL CA at [77]. As the Court of Appeal said at [77]-[78]:

...The FTT was right to note that "employee benefit contributions" is not itself directly defined. Even if it were, the choice of words used for a defined term is not to be treated as wholly neutral but may properly influence its meaning: see Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 per Lord Hoffmann at [17]. "Employee benefit contributions" is not an empty vessel or algebraic symbol, dependent wholly on section 1291(1) for any meaning.

78. A contribution, resulting in property being held or used under an employee benefit scheme, suggests a payment or transfer from which benefits will be provided to employees. As the FTT said, this is expressly contemplated by section 1290(2)(a)." (A D Bly v. HMRC [2024] UKUT 104 (TCC), Judges Thomas Scott and Greenbank)

"[36] This interpretation also has the merit that it gives to the words “unused part of his basic rate band” in s. 4(3) TCGA 1992 a meaning which is its natural meaning. Mr Furness relies on the fact that “basic rate band” is not itself a statutorily defined term, and that to find out what the whole phrase means one 20 has to look at s. 4(4), which is simply a means of introducing an arithmetical formula. It is however a general principle that where a statute uses a defined expression, be it a word or a phrase, the ordinary meaning of the defined expression is part of the material that can be used as an aid to interpretation. We were not in fact taken to any authority for this proposition but neither 25 counsel dissented from it and it is well established. As Mr Pritchard mentioned, it was endorsed by the House of Lords in Oxfordshire County Council v Oxford City Council [2006] UKHL 25 (see at [38] per Lord Hoffmann (“in construing a definition, one does not ignore the ordinary meaning of the word which Parliament has chosen to define”) and at [82] per 30 Lord Scott, approving a statement in Bennion, Statutory Interpretation that “its dictionary meaning is likely to exercise some influence over the way the definition will be understood by the court” and referring to statements in previous House of Lords cases). See also the subsequent statements of Lord Hoffmann in Birmingham City Council v Walker [2007] UKHL 22 at [11] 35 (“the ordinary meaning of the word is part of the material which can be used to construe the definition”) and Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 at [17] where in relation to the analogous question of contractual interpretation he said:

“The words used as labels are seldom arbitrary. They are usually chosen as a 40 distillation of the meaning or purpose of a concept intended to be more precisely stated in the definition. In such cases the language of the defined expression may help to elucidate ambiguities in the definition or other parts of the agreement.”" (Scott v. HMRC [2018] UKUT 236 (TCC), Nugee J and Judge Aleksander)

"[67] Fourthly, there is high authority for the proposition that, if the terms of a definition are ambiguous, the choice of the term to be defined may throw some light on their meaning: see MacDonald v Dextra, loc. cit., at [18] per Lord 5 Hoffmann. Section 18 gives, in effect, a definition of “receipt” of earnings for the purposes of Chapter 4 of ITEPA. On UBS’s interpretation, Rule 2 is only a slight extension of the natural meaning of receipt embodied in Rule 1, and its rationale is easy to understand; but on HMRC’s interpretation, the accrual of an entitlement to a future payment is the very antithesis of receipt of such a 10 payment, and there is no obvious explanation why Parliament should have wished to extend the basic charge to tax on receipts to cover such a situation, particularly given the acute practical difficulties which could be expected to arise. More generally, if (for example) a person agrees to accept employment for a period of two years at a fixed salary payable monthly in arrears, nobody 15 would say that the full two years’ salary was received by the employee at the date when the contract of employment was signed, and the employer would no doubt be startled to learn that it was expected to deduct and account for tax under PAYE on the full amount at that date." (UBS AG v. HMRC [2021] UKUT 320 (TCC), Henderson J and Judge Hellier)

- But not if the term has no clear or generally understood ordinary meaning

"[49] The difficulty in trying to use this sensible principle of interpretation in the present case is that it was agreed, and the Divisional Court accepted, that the phrase “claims management services” defined in section 4(2) of the 2006 Act did not have any established legal meaning. Nor, as explained below, did it have any clear or generally accepted meaning in ordinary parlance which was capable of exerting any significant “potency” in terms of qualifying the ordinary words used by Parliament in section 4(2) and (3) of the 2006 Act to define that term. Where an express definition of a term is given in statute then even if there is consensus as to its core content, in the absence of general consensus as to the limits of the term no significant potency can be attached to the term so as to colour or qualify the meaning of the definition: Phillips v News Group Newspapers Ltd [2013] 1 AC 1, para 20 (Lord Walker of Gestingthorpe, with whom the other members of the court agreed). Still less will the term defined have potency to colour the meaning of the definition if there is no general consensus as to the core meaning of the term, which is the case here. Rather, Parliament deliberately used wide words of definition in the 2006 Act precisely because of the nebulousness of the notion of “claims management services” at the time and in order to ensure that the general policy objective of Part 2 of the 2006 Act would not be undermined. That objective was to confer a general power on the Secretary of State appropriate for the regulation in the public interest of this developing area of activity, involving the creation of new commercial models to facilitate litigation and access to justice. The fact that Parliament provides a statutory definition of a term means that it is not satisfied that the term itself is sufficiently clear on its own. Where Parliament has taken the trouble to provide a definition, it is the words of the definition which are the primary guide to the meaning of the term defined. The weaker the inherent or established meaning of the term defined, the weaker must be its ability to throw light on Parliament’s meaning when setting out the express words of the definition which falls to be construed.

...

[79] Secondly, “claims management services” had no established and generally accepted meaning which could lead a reader of the text of section 4 to suppose that the express language of the definition was to be treated as qualified or coloured by that meaning. Section 4 of the 2006 Act is thus to be contrasted with those statutory contexts where the term defined does have this effect." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)

- Or where there is no consensus as to the limits of the term

"[49]...Where an express definition of a term is given in statute then even if there is consensus as to its core content, in the absence of general consensus as to the limits of the term no significant potency can be attached to the term so as to colour or qualify the meaning of the definition: Phillips v News Group Newspapers Ltd [2013] 1 AC 1, para 20 (Lord Walker of Gestingthorpe, with whom the other members of the court agreed)." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)

"[21] Here there is no particular potency about the expression "intellectual property" because there is a general consensus as to its core content (patents for inventions, literary, dramatic, musical and artistic copyright, copyright in recordings, films and broadcasts, registered and unregistered design rights and trademarks, all now governed by national statutes and international treaties), but no general consensus as to its limits. The sweeping-up words at the end of the definition ("or other intellectual property") no doubt include new and specialised statutory rights akin to those in the core content, such as plant breeders' rights under the Plant Varieties Act 1997 and database rights under the Copyright and Rights in Databases Regulations 1997 (SI 1997/3032). But for present purposes the essential point is that the definition in section 72(5) contains the words "technical or commercial information." Parliament has made plain that information within that description is, for the purposes of section 72, to be regarded as intellectual property, whether or not it would otherwise be so regarded. Such limited potency as there is in the expression "intellectual property" (and more generally, the legislative purpose of section 72 in enhancing protection against unlawful trade competition) may be of assistance in determining the meaning of "technical or commercial information". It must be something in which a civil claimant has rights capable of being infringed, since infringement of rights pertaining to intellectual property is what section 72(2)(a) is concerned with. The fact that technical and commercial information ought not, strictly speaking, to be described as property (the majority view of the House of Lords in Boardman v Phipps [1967] 2 AC 46, 89-90, 103 and 127-128; cf 107 and 115) cannot prevail over the clear statutory language. Whether or not confidential information can only loosely, or metaphorically, be described as property is simply irrelevant." (Phillips v. Mulcaire [2012] UKSC 28)

- "Wages" has a well understood basic meaning

"[80] Delaney v Staples (trading as De Montfort Recruitment) [1992] 1 AC 687 concerned the interpretation of a statutory provision which conferred exclusive jurisdiction on industrial tribunals in respect of the lawfulness of deductions from wages, where “wages” was defined in wide terms to mean “any sums payable to the worker by his employer in connection with his employment”, with a series of items said to be included within this. The question was whether a tribunal had jurisdiction under this provision to adjudicate on the lawfulness of a failure to make a payment in lieu of notice to an employee who was summarily dismissed. The House of Lords held that since “wages” were payments in respect of the rendering of services during employment, the term did not cover payments in respect of the termination of a contract of employment. The main reasons for this conclusion were that the procedural provisions of the statute were not compatible with such an interpretation and it would have an unjustified effect on the employer’s rights of set-off under the general law. However, a failure to pay some sums after termination of the employment would be covered according to the definition, and in order to draw the necessary dividing line Lord Browne-Wilkinson, who gave the sole substantive speech, said (p 697) that “one is thrown back to the basic concept of wages as being payments in respect of the rendering of services during the employment, so as to exclude all payments in respect of the termination of the contract save to the extent that such … payments are expressly included” in the relevant statutory definition. This reasoning depended upon the concept of “wages” having a well understood basic meaning." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)

- "Potential emolument" relevant to interpreting definition

"[18]... the ordinary use of language, the whole of the funds were potential emoluments. They could be used to pay emoluments. It is true that, as Charles J pointed out, "potential emoluments" is a defined expression and a definition may give the words a meaning different from their ordinary meaning. But that does not mean that the choice of words adopted by Parliament must be wholly ignored. If the terms of the definition are ambiguous, the choice of the term to be defined may throw some light on what they mean." (Macdonald v. Dextra Accessories Limited [2005] UKHL 47)

Exhaustive and inclusive definitions

"[57] In relation to the interpretation of definitions, the authorities show that:

(1) when a later enactment incorporates a definition from an earlier enactment, the definition must be assumed to bear the same meaning in the later enactment as in the earlier one, regardless of the context in which the later enactment came into being or the mischief at which the later enactment was aimed. To adopt a different approach would be "both inconsistent with the plainly expressed will of Parliament ... and a recipe for uncertainty in future cases of statutory interpretation" - see Lord Neuberger in Williams v Central Bank of Nigeria [2014] UKSC 10 at paragraphs [72] and [73];

(2) an exhaustive definition - typically taking the form "X means..." - provides a comprehensive description of everything covered by the defined term and displaces any meaning that the defined term would otherwise have had - see Bennion at paragraph 18.2. It is to be contrasted with an inclusive or exclusive definition, each of which modifies the natural meaning of the defined term; and

(3) that is not to say that the interpretation of a definition cannot be coloured by the defined term itself, particularly in cases of doubt. In an appropriate case, "the potency of the term defined" may provide some guidance as to the meaning of that term as set out in the statutory definition - see Bennion at paragraph 18.6. In each case, it is necessary to consider the language used in the definition and the strength or weakness of the inherent or established meaning of the term which is being defined. As Lord Sales explained in PACCAR at paragraphs [48] and [49], "[where] Parliament has taken the trouble to provide a definition, it is the words of the definition which are the primary guide to the meaning of the term defined. The weaker the inherent or established meaning of the term defined, the weaker must be its ability to throw light on Parliament's meaning when setting out the express words of the definition which falls to be construed"." (JD Wetherspoon Plc v. HMRC [2025] UKFTT 658 (TC), Judge Beare)

- If Parliament imports a definition, it must have the same meaning as in the earlier statute

"[50] Where a term in a later statute is defined by reference to a definition in an earlier statute, it seems to me self-evident that the meaning of the definition in the later statute must be the same as the meaning of the definition in the earlier statute. Hence, the meaning of the term in the later statute is determined by the definition in the earlier statute. Further, the adoption of the definition in the later statute cannot somehow alter the meaning of the definition in the earlier statute. It accordingly follows that one has to determine the meaning of the term in the later statute simply by construing the definition in the earlier statute. Thus, the meaning of "trustee" in section 21(1)(a) must be determined by construing the definition of "trustee" in section 68(1)(17) of the 1925 Act ("section 68(1)(17)"). In the light of Lord Mance's judgment, it is, I think, important to emphasise that the way in which the definition of "trustee" in section 68(1)(17) is incorporated into the 1980 Act appears to leave no scope for contending that the meaning of the expression in the 1980 Act can somehow be different from that which it bears in the 1925 Act." (Williams v. Central Bank of Nigeria [2014] UKSC 10, Lord Neuberger)

"Unless the context otherwise requires"

- Allows partial adjustment of definition

[75] However, here a statute imports a complex, many-limbed definition from another statute and provides that the definition applies in a number of different places in the importing statute. We do not see that it makes sense to treat the qualifying words that Parliament has included in s 288 as requiring a choice between applying every element in the definition or none...

...

[77] Newfields therefore recognises that where a definition has been drafted for one purpose but is imported into another context for a different purpose one must take care in applying it in that other context not to include unsuitable elements that arrive at results which are illogical or which require one to take into account an irrelevant consideration. Again, we recognise that this case is not on all fours with Newfields because there is no doubt that the associate attribution rule is part of the definition of 'control' and not some additional wording which is intended only to apply in the original context of defining close companies. But it would not be possible to follow Lord Hoffmann's guidance if one were faced with the choice of either applying s 416 in its unmodified entirety or disapplying it." (Reeves v. HMRC [2018] UKUT 293 (TCC), Rose J and Judge Sinfield)

Definition deliberately not incorporated (use ordinary meaning)

"[43] We conclude that “market value” for the purpose of s. 1020 is not to be interpreted as the “open market” value as defined in s. 272 of TCGA or any other similar provisions. Had the drafter intended that to be the case then a definition to that effect would, in our view, have been included as in s. 609 and s. 210. We agree with HMRC that we cannot directly import definitions used for the purposes of other taxes, as the statutory provisions are different." (HMRC v. Pickles [2022] UKUT 253 (TCC), Bacon J and Judge Ramshaw)