© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Importance and exclusivity (degrees of)
Ancillary
- Something (usually an activity) which is additional to or supportive of something else
"[69]..."Ancillary" generally means something which is additional to or supportive of something else. I also agree with the appellant that the words "ancillary" and in particular "incidental" most naturally refer to an activity rather than a building and that in the context of section 2 they, and the word "thereto", are referring to the "burning of human remains" rather than the crematory "building"." (Wathen-Fayed v. SoS [2025] UKSC 32)
- Handing out leaflets not ancillary or incidental to passing along the highway
"Nor can I attribute any hard core of meaning to a test which would limit lawful use of the highway to what is incidental or ancillary to the right of passage. In truth very little activity could accurately be described as "ancillary" to passing along the highway; perhaps stopping to tie one's shoe lace, consulting a street-map, or pausing to catch one's breath. But I do not think that such ordinary and usual activities as making a sketch, taking a photograph, handing out leaflets, collecting money for charity, singing carols, playing in a Salvation Army band, children playing a game on the pavement, having a picnic, or reading a book, would qualify. These examples illustrate that to limit lawful use of the highway to that which is literally "incidental or ancillary" to the right of passage would be to place an unrealistic and unwarranted restriction on commonplace day-to-day activities. The law should not make unlawful what is commonplace and well accepted." (DPP v. Jones [1999] UKHL 5)
Incidental
- Meaning depends on context and may mean subordinate
"[122] In contrast, the FTT in that case had treated the meaning of "incidental" as meaning subordinate or secondary, and the UT had upheld that decision before being reversed by the Court of Appeal.
[123] This case rather illustrates why Lord Hodge was disinclined to comment on other statutory contexts, since it is far from straightforward to apply these general comments here. By definition, a transaction must have a connection with the transfer of the land interest from V to P in order to be a scheme transaction in the first place, and therefore a candidate for being "incidental". Further, it might be thought that the more independent of the land transfer a transaction is, the more merited might be the argument that the consideration for it ought to be excluded. In contrast, the FTT's approach in Dolphin Drilling might make more sense in the present context. Overall, I have not been able to derive assistance from Dolphin Drilling and have reached my conclusion by reference to the specific statutory context of s.75B(1)." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588)
- Something (usually an activity) which is connected with something else or happens as a result of it
"[69]..."Incidental" generally means something which is connected with something else or happens as a result of it....I also agree with the appellant that the words "ancillary" and in particular "incidental" most naturally refer to an activity rather than a building and that in the context of section 2 they, and the word "thereto", are referring to the "burning of human remains" rather than the crematory "building"." (Wathen-Fayed v. SoS [2025] UKSC 32)
- Ordinary meaning: incidental purpose or use must be linked to main purpose/use and be secondary
"[41] So what is it for one use of an asset to be incidental to another? Where ordinary words are used in legislation it is well recognised that seeking to provide definitions of them can be a dangerous exercise, as glossing the statutory language by using other words runs the risk of those (non-statutory) words being treated as a substitute for the statutory words when they may not have quite the same meaning. Most English words have nuances of meaning and shades of usage that are not precisely captured by substituting other words. So one should be wary of trying to lay down a definition of ordinary words; the meaning of an ordinary word is to be found not so much in a dictionary but in how it is in fact ordinarily used, and I think it is generally more helpful to tease out the meaning of ordinary words by providing illustrative examples of how they are used in everyday contexts.
[42] The risk of substituting other words is neatly illustrated by the statement of the FTT at [170] that something is incidental to another matter "if it is subordinate, or secondary, to it". It is no doubt generally true that if use A is incidental to use B, then use A will be of lesser or secondary importance to use B. But that does not mean that being subordinate or secondary is what incidental means, and by expressing it in this way there is a danger of substituting a test of whether use A is secondary or subordinate to use B for the test of whether use A is incidental to use B. As Mr Ewart submitted, the FTT seem to have decided the ultimate question by assessing whether use A (the use of the Borgsten to accommodate those working on the Dunbar) was in some way lesser than use B (the other uses of the Borgsten). But as he said that does not accurately capture what it is for use A to be incidental to use B.
[43] His submission was that use A is only incidental to use B if there is some link between them, or if use A is tied in to use B, and that this is not the case if use A is an unconnected and independent purpose in itself. He gave the example of a barrister using a laptop to write a shopping list (use A) when it is primarily used to write opinions (use B). In such a case, he said, the use of it to write a shopping list is not incidental to the use of it to write opinions. Using the laptop to write a shopping list is no doubt of minor or secondary importance compared to using it to write opinions, but there is no connection between the two (other than that they happen to be uses of the same asset).
[44] I think this submission is well-founded. It seems to me to reflect the ordinary use of language. If I can express it in my own words, one would normally say that use A is incidental to use B if it arises out of use B, something that is done because of use B, or in connection with use B, or as a by-product of use B. Using a laptop to write a shopping list does not arise out of using it to write opinions – it is an independent end in itself, unconnected with the writing of opinions, albeit no doubt very much a subordinate or secondary or lesser one." (HMRC v. Dolphin Drilling Ltd [2024] EWCA Civ 1, Nugee, Jackson, Newey LJJJ)
- A use may be incidental even if it does not further the main use
"[47] Mr Ewart submitted that Pennycuick V-C's statement that as a matter of ordinary usage an activity is merely incidental if it does not serve any independent purpose but is carried out in order to further some other purpose is equally applicable in the present context: if use A serves no independent purpose of its own but is carried out to further use B, it is incidental to use B. For reasons already given I am reluctant to endorse that as a definition of what it is for use A to be incidental to use B, and indeed I think one could envisage a case where use A might be incidental to use B even though it could not really be said to further use B. Suppose for an example a boat is used to ferry supplies somewhere and some of the crew take the opportunity to fish over the side of the boat. I would accept that the use of the boat for fishing might be said to be incidental to its use to ferry supplies, even though fishing could scarcely be said to further the ferrying of supplies. This would be more a case of what I have referred to as use A being a by-product of use B." (HMRC v. Dolphin Drilling Ltd [2024] EWCA Civ 1, Nugee, Jackson, Newey LJJJ)
- Unlikely to be incidental if it serves an independent purpose of some significance
"[48] But on the other hand I agree that it is difficult to regard use A as merely incidental to use B if it serves an independent purpose of its own, unconnected with use B, at any rate if that purpose is of some significance and not trivial or casual. And, contrary to a submission by [the taxpayer], I see no difference between use A being "merely incidental to" use B and use A being "no more than incidental to" use B. These to my mind mean the same thing.
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[50] In my judgement therefore the relevant considerations in deciding whether the use of the Borgsten to accommodate those working on the Dunbar was incidental to its other uses are whether its use as such accommodation was an independent end in itself (of some significance), unconnected with its other uses, or whether it was something that arose out of its other uses.
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[62] To use an example put by Newey LJ in argument, if a car park is provided for an office block and 30 spaces are reserved for the use of the main tenant, and 20 spaces for another tenant, the use of the car park for the latter is not incidental to the use of the car park for the former even though the latter is clearly not the primary use. It is a significant independent use in itself, unconnected with the use of the car park for the main tenant. In the same way the use of the Borgsten to provide accommodation for the Total personnel working on the Dunbar does not seem to me to have been incidental to its use to provide accommodation for the Dolphin personnel working on the Borgsten." (HMRC v. Dolphin Drilling Ltd [2024] EWCA Civ 1, Nugee, Jackson, Newey LJJJ)
- Secondary use with independent purpose not incidental
"[52] The use of the Borgsten for accommodation of those working on the Dunbar was not simply something that arose out of its use as a TSV supplying TAD services to Total. It was an independent end in itself, of some significance – indeed essential if Total was to be able to have more than 60 personnel working on the Dunbar at any one time as it wished. I agree with Mr Ewart that it could not therefore be said to be no more than incidental to the other uses of the Borgsten. Put simply the Borgsten was not only used to provide TAD services to the Dunbar, it was also used as an accommodation vessel for the Dunbar. This may have been a "secondary" use, but it was a significant and independent use and not incidental to its other uses." (HMRC v. Dolphin Drilling Ltd [2024] EWCA Civ 1, Nugee, Jackson, Newey LJJJ)
Main
- Something of real importance/meaningful
"[44] We derive the following principles from the decision in Allam:
(1) entrepreneurs' relief should not be available for disposals of shares in companies that have non–trading activities which are of real importance when viewed in the context of the company's activities as a whole;
(2) although the legislation refers to "activities", that word is not limited to the active steps which the company in question takes in the furtherance of its business. Even though investments may not require much active management, those investments must nevertheless be taken into account in the application of the test;
(3) the test is a holistic one which is not confined to physical human activity but requires an overall consideration of what it is that the company actually does;
(4) there is no authority in the legislation for using a numerical threshold in construing the phrase "to a substantial extent". In each case, it is necessary to determine by reference to the facts as a whole whether the non–trading activities of the company are a substantial part of the activities of the company taken as a whole; and
(5) the test is both quantitative and qualitative. It is necessary both to look at the nature of the activities and to measure in some way the extent of those activities.
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[55] In conclusion, when one stands back and looks at the activities of the company as a whole and asks "what was this company actually doing?", as the decision in Allam requires us to do, we do not see how it is possible to say that the non–trading activities of the company over the relevant period were not meaningful. On the contrary, for the reasons given above, we think that, adopting the qualitative and quantitative approach set out in Allam, the non–trading activities were a substantial part of the overall activities of the company." (Eyre v. HMRC [2025] UKFTT 566 (TC), Judge Beare)
Substantial
- "Main purpose" connotes importance, but may be one of several main purposes
"[105] [The taxpayer's] fourth submission was that even if a purpose of the arrangements is the avoidance of liability to tax it was not a "main" purpose. Ms Shaw relied on the decision of the Court of Appeal in TDS, which included that "main" has a connotation of importance, and that assessing whether a purpose is a main purpose is a comparative exercise.
[106] We agree with [the taxpayer's] submissions as to the approach to be taken to assessing whether a purpose is a main purpose. However, we consider that the FTT did adopt this approach." (The Tower One St George Wharf Limited v. HMRC [2024] UKUT 373 (TCC), Judge Zaman and Judge Bowler)
"[22] We remind ourselves of some general principles culled from the legislation and case law:
(1) The question of whether the appellants had a main purpose of obtaining an income tax advantage is a pure question of subjective fact (Brebner at 30, as approved and applied in Allam).
(2) It is a purpose and not a benefit test, and concerns only an income tax advantage and not a more general tax advantage. So, if a transaction has another purpose so that the obtaining of an income tax advantage is not a main purpose then the motive test is not satisfied even if an income tax advantage actually arises.
(3) Nor is it satisfied if the obtaining of an income tax advantage is not a main purpose but merely a subsidiary purpose.
(4) The test is however satisfied if one of the main purposes of the transactions is to obtain an income tax advantage. In other words, there can be more than one main purpose." (Osmond v. HMRC [2024] UKFTT 378 (TC), Judge Popplewell)
"[67] As for the meaning of "main" in reference to "main purpose" the parties are agreed that the best guidance that can be provided is to be found at [48] Travel Document Service v HMRC [2018] EWCA Civ 549 ("Travel Document Service") where it was held that "main" in this context has a "connotation of importance". If one was looking simply at a "main" purpose (singular) then I should venture "primary" purpose as very good proxy or working definition. The difficulty, however, is that here we are also looking at "one of the main purposes" (plural). Given the obvious difficulties in having more than one "primary" purpose; it is, therefore, not surprising that in Travel Document Service the Court of Appeal was forced to conclude that, in this context, "main purpose(s)" [68] In my judgment, after applying the above-mentioned guidance, when looking for the main purpose or one of the main purposes, another way of asking the same question is to ask whether tax avoidance was either (1) the most important or one of the most important purposes, or (2) an important or one of the important purposes. I appreciate that there is a difference between the two formulations that I have set out, but because I did not hear full arguments on the point and because my decision does not turn on the issue I leave further finessing to another case." (Brindleyplace Holdings Sarl v. HMRC [2024] UKFTT 808 (TC), Judge Malek)
"The parties were largely agreed in relation to the “ordinary meaning” of this phrase. They agreed that:
(1) the phrase “main purpose or one of the main purposes” was not defined in the Treaty;
(2) however, it was legitimate to interpret the phrase in accordance with relevant UK case law pursuant to Article 3(2) of the Treaty, which specified that terms which were not defined in the Treaty were to be interpreted in accordance with the provisions of the tax law of the relevant contracting state (in this case, the UK);
(3) determining a person’s main purpose was a question of fact - see Inland Revenue Commissioners v Brebner [1967] 2 AC 18 (“Brebner”) at paragraphs 26B-C and 30C-E;
(4) the conclusion of fact was to be made “upon a consideration of all the relevant evidence…and the proper inferences to be drawn from that evidence” - see Brebner at paragraph 30G;
(5) the test required consideration of the subjective intentions of the relevant person - see Brebner at 27D-E and 30B;
(6) the word “main” did not mean “more than trivial”. Instead, it had the connotation of importance - Travel Document Services v The Commissioners for Her Majesty’s Revenue and Customs [2018] STC 723 (“TDS”) at paragraph [48]; and
(7) in order for this test to be satisfied, it was not necessary for the relevant matter - in this case, taking advantage of Article 12(5) - to be the sole purpose or the only main purpose. It was sufficient for the relevant matter to be one of several main purposes." (Burlington Loan Management DAC v. HMRC [2022] UKFTT 290 (TC), Judge Beare)
- Can still be a main purpose even if less significant than another main purpose
"[69] A purpose will be a “main” purpose if its achievement is one of the primary aims of the arrangements. A purpose can be a “main” purpose, even if it is not as significant a consideration as another main purpose. Thus, if arrangements are driven by two particularly significant aims, A and B, as well as other subsidiary aims, both A and B may both be “main” purposes even if the taxpayer considers A to be more important than B.
[70] Indeed, purpose B could be a main purpose of the arrangements, even if the arrangements would not have been entered into at all but for the need to achieve purpose A. Even if purpose A is the sole reason for entering into arrangements in the first place, once the decision to enter into the arrangements has been taken, an additional purpose can become an additional main purpose of the arrangements. Whether this is the case will be a question of fact, depending on the individual case. The question is whether a purpose is one of the main purposes, not whether it is the most important purpose, and not whether the arrangements would be proceeded with in the absence of any of the other purposes." (The Tower One St George Wharf Limited v. HMRC [2022] UKFTT 154 (TC), Judge Staker)
- Still a main purpose if only wanted as long as it does not interfere with other purpose
"[103] It seems to me clear, on the evidence before the Tribunal, that the ultimate shareholders very much wanted UKPNH's corporate structure to enable the appellants to obtain enhanced consortium relief following the acquisition, provided that doing so did not interfere with their other, "non-tax" objectives for the structure; the reasons for that were readily apparent:...
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[108] I conclude that the "consortium relief" purpose of UKPNH's corporate structure was not one that paled into insignificance when set alongside that structure's "non-tax" purposes, but rather that it, too, was a main purpose of that structure." (Eastern Power Networks Plc v. HMRC [2025] UKFTT 703 (TC), Judge Citron)
- Charitable purpose may be subsidiary or main purpose depending on the facts
"[49] For the above reasons we conclude, like the FTT implicitly did, that the practical provision of Relief is not, as argued by Mr Thomas, just part and parcel of the philosophy of Freemasonry so that it must be regarded as being in service of that philosophical aim and incapable of being regarded as a main aim in its own right. In principle, charitable activity is certainly an activity that is capable of being a subsidiary aim in service of a main aim but can also be a separate main aim. It follows that we reject the argument that had the FTT properly addressed the Appellant's case it was bound to conclude that the provision of Relief was subsumed in the philosophical aim." (United Grand Lodge of England v. HMRC [2023] UKUT 307 (TCC), Judges Ramshaw and Poole)
- Tax purpose not a main purpose of sale of shares where it would not be pursued if it jeopardised deal
"[84] I find that, although the goal of enabling the Wilkinsons’ CGT planning, as explained at [46] above, to proceed, affected the deal in a number of ways, it was not the main purpose, or one of the main purposes, of the deal. I make that finding for the following reasons, cumulatively and in the round:
(1) the pre-eminent “main purpose” of the deal was that the shareholders in P Ltd sell their shares to TF1 for a value of £130 million
(2) the large minority shareholding bloc – those who held approximately 42% of P Ltd’s ordinary shares – had no stake in the Wilkinsons’ CGT planning
(3) even for the Wilkinsons, as the majority shareholders, viewed in isolation, the value of the CGT planning – about £3 million – was small: about 4% of their approximately £73 million (anticipated) proceeds
(4) under the heads of terms, the buyer could effectively “walk away” if it was not “comfortable” with the sellers’ proposed tax planning in terms of its commercial effects (see [41] above); in other words, it was not one of the agreed terms, at ‘heads of terms’ stage, that the structuring required for the Wilkinsons’ CGT planning be adopted;
(5) the emails of 11 July 2016 involving Mr Tate, Mr Wilkinson and Mr Warburton, Mr Wilkinson’s tax adviser, show that Mr Wilkinson was not prepared to scupper the deal even if the structuring required for Wilkinsons’ CGT planning could not be achieved; this reflects the points made at (1) to (3) above
(6) the SPA gave no protection or price adjustment in the event that the Wilkinsons’ CGT planning did not have the desired effect." (Wilkinson v. HMRC [2023] UKFTT 695 (TC), Judge Citron - scheme was for daughters to get loan notes + shares in buyer and hold for one year to qualify for entrepreneur's relief)
- Retention of capital allowances by vendor a "bargaining chip" rather than main purpose
"[183] The Election was a means for Premier to pay part of the pro-rata consideration for the POSPA Interest. There was no evidence to suggest that it was important to PUK that they receive the consideration in this way. Indeed Mr Parr's evidence, supported by the documentary evidence, is that PUK were initially not happy with the proposal from Premier to pay some of the consideration by way of a section 198 election.
[184] In the event, because of the way that the deal was structured it was important that the Election was made, which is why both parties committed to it in the POSPA, but it was an important means of achieving the purpose of the arrangement, it was not itself a purpose of the arrangement. Mr Parr stated in cross examination that the Election was a "key bargaining chip". However a bargaining chip does not equate to a main purpose.
[185] For all the reasons above we find that the tax advantage that PUK obtained by entering into the POSPA and the Election was not its main purpose and section 197 therefore would not apply to replace the Election with the notional written down value." (Perenco UK Limited v. HMRC [2026] UKFTT 1096 (TC), Judge Snelders)
Primarily
- First and foremost rather than marginally more
"[62] I agree. It seems to me that it is clear that the use of "primarily" imports something more than a suitability which is marginally greater than another or any number of other suitabilities. In my judgment, therefore, the UT was wrong to conclude at [27] that "if a vehicle is of a construction marginally more suitable for the conveyance of goods than it is for any other use, its "primary suitability" is that of conveying goods". "Primarily" requires more than a percentage point advantage of one suitability over another. To put the matter another way, in my judgment, the natural and ordinary meaning of "primarily" requires the decision-maker to determine what the vehicle in question is first and foremost suitable for. Its suitability must be considered in the round and is not merely the produce of a mechanical or mathematical exercise.
[63] I also agree with Ms McCarthy, therefore, that it is possible, although not inevitable in every case, that a multi-purpose vehicle may not have a primary suitability at all. On the other hand, a vehicle may have numerous purposes, but, nevertheless, be primarily suited to one of them." (Payne v. HMRC [2020] EWCA Civ 889, Asplin, Patten, David Richards LJJJ)
Specifically (e.g. specifically designed)
- Particularly, but not necessarily exclusively
"[269] The question asked is whether the chicken paper bags were "specifically designed" for hot food. "Specifically" is defined in the Oxford English Dictionary as meaning, among other things, "particularly; with a particular or clearly defined purpose, meaning etc". Whilst "specifically" requires a particular purpose, it does not carry any connotation of exclusivity. We consider that, if, looking at the characteristics of the chicken paper bags objectively, it would be reasonable to conclude that the packaging has been designed with hot food in mind, to address particular problems presented by hot food, then they can be said to have been specifically, albeit not exclusively, designed for hot food." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)
Exclusively
- "Exclusively" means solely
"[96] In our judgment, the wording in paragraph 5(1) is clear and requires that the property is acquired "exclusively" for one of the specified purposes. "Exclusively" is defined in the OED as: "So as to exclude all except some particular object, subject, etc.; solely". We therefore agree with and adopt the statement at [24] in the Tribunal decision in Consultus:
"[24] It is notable that paragraph 5(1) requires that a property is acquired "exclusively" for one of the specified purposes. It is not a main purpose test (which could be satisfied where there was more than one purpose and one of those could be said to be the main purpose). The express language requires that the only purpose of CCN is one of those specified (in this case for exploitation as a source of rents as a qualifying property rental business)."" (Investment And Securities Trust Limited v. HMRC [2024] UKFTT 230 (TC), Judge Williams)
Including
- "Including" generally not exhaustive
"[68] In considering this issue, we would start by saying that we do not agree with Mr Gardiner that the definition of "investment management services" in Section 809EZE of the ITA is to be construed as being exhaustive. We say that because:
(1) it is plain from the dicta in Dilworth that the more general approach to a definition containing the word "including" is to treat it as being inclusive and that it should be treated as being exhaustive only in the unusual circumstance where the context of the legislation in question suggests that the word is "not merely employed for the purpose of adding to the natural significance of the words or expressions defined";
(2) in this case, the context of the legislation points very firmly in favour of the general approach;
(3) first, the definition in this case appears in the context of anti-avoidance legislation and that suggests that a wide definition was more likely to have been intended by Parliament;
(4) secondly, there are other definitions in the same section which use the word "mean", such as the definitions of "external investor" and "profits". That suggests that the draftsman was fully aware of the difference between an inclusive definition and an exhaustive one and deliberately chose the former in this case;
(5) thirdly, there is another definition in the same section, the definition of "arrangements", which uses the word "includes" in a sense which is clearly meant to be inclusive and not exhaustive. That again suggests that the draftsman was fully aware of the difference between an inclusive definition and an exhaustive one and deliberately chose the former in this case;
(6) fourthly, we have noted that there are many activities other than the ones enumerated in the four paragraphs of the definition that would naturally fall within the meaning of the phrase "investment management services" and we can see no reason why the draftsman would have wished to exclude such other activities from the defined term in the present case;
(7) fifthly, and conversely, we have noted that the four activities which are set out in the definition include certain activities which would not naturally fall to be regarded as investment management and that suggests that, by the list, the draftsman was intending to expand the meaning of the terms "investment management services"; and
(8) finally, we do not see any force in the submission set out in paragraph 61 above. If the draftsman was faced with the conundrum mentioned in that paragraph, he or she could easily have used the word "mean" and deployed the words "and/or" immediately prior to the fourth paragraph of the definition."(Millican v. HMRC [2024] UKFTT 618 (TC), Judge Beare)