© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H9.Ownership and entitlement
GENERAL
- Fixtures become part of the land and are owned by the owner of the land
"The equipment in these cases was attached to the land in such a manner that, to all outward appearance, it formed part of the land and was intended so to do. Such fixtures are, in law, owned by the owner of the land." (Melluish v. BMI [1996] AC 454 at 473, Lord Browne-Wilkinson)
Fixtures
- Contractual provisions cannot stop chattel becoming part of the land
"Unfortunately, the decision in Hobson v. Gorringe [1897] 1 Ch. 182 was not cited to Buckley J. That case (which was approved by this House in Reynolds v. Ashby & Son [1904] A.C. 466) demonstrates that the intention of the parties as to the ownership of the chattel fixed to the land is only material so far as such intention can be presumed from the degree and object of the annexation. The terms expressly or implicitly agreed between the fixer of the chattel and the owner of the land cannot affect the determination of the question whether, in law, the chattel has become a fixture and therefore in law belongs to the owner of the soil: see pp. 192-193. The terms of such agreement will regulate the contractual rights to sever the chattel from the land as between the parties to that contract and, where an equitable right is conferred by the contract, as against certain third parties. But such agreement cannot prevent the chattel, once fixed, becoming in law part of the land and as such owned by the owner of the land so long as it remains fixed. To the extent that Simmons v. Midford decides otherwise it was wrongly decided." (Melluish v. BMI [1996] AC 454 at 473, Lord Browne-Wilkinson)
- Lessor may have some equitable rights in equipment affixed to land
"In my judgment these cases do provide some support for the taxpayer's argument since they demonstrate that the rights conferred by the master lease are not purely contractual (and as such only enforceable between the parties) but also confer on the taxpayer company an equitable right in the equipment enforceable against any subsequent taker of the land to which it is affixed other than a bona fide purchaser for value without notice." (Melluish v. BMI [1996] AC 454 at 473, Lord Browne-Wilkinson)
OWNERSHIP CONCEPTS
Belongs to
- Property belongs to a person if he is, in law or in equity, the absolute owner of it
""I therefore reach the conclusion that for the purposes of section 44 property belongs to a person if he is, in law or in equity, the absolute owner of it. Such a construction reflects the obvious, prima facie, meaning of the word: what belongs to me is what I own. It produces a coherent and easily applicable formula and, save in relation to fixtures, avoids anomalous results." (Melluish v. BMI [1996] AC 454 at 473, Lord Browne-Wilkinson)
- Not satisfied by limited interest (e.g. lease or contingent equitable rights)
"It is important to bear in mind that the question whether the equipment "belongs" to the taxpayer company does not fall to be answered once and for all at one particular date. The question has to be answered in relation to each chargeable period; moreover, in calculating the disposal value which has to be brought into account for the purpose of the balancing charge, it is necessary to determine whether and when the equipment has ceased "to belong to" the taxpayer: section 44(5)(c). Therefore in construing the word "belongs" as used in section 44 one would expect, first, that the question whether equipment belongs or has ceased to belong to the taxpayer would be capable of a ready answer and, second, that the taxpayer could control, or at least be aware of, circumstances which caused the property to cease to belong to him. Yet if the taxpayer companies' submission is correct, equipment which belongs to them could at any time "cease to belong," thereby giving rise to a balancing charge, without the taxpayer companies knowing anything about it. Vinelott J. [1995] Ch. 90held (in my view rightly) that even if otherwise the equipment belonged to the local authority, as soon as it granted a tenancy of a council house the equipment in the house could not thereafter be said to belong to the taxpayer company so long as the tenancy continued. The tenant would be a purchaser for value of a legal estate without notice and would take free of the contractual and equitable rights of the taxpayer company under the master lease. The right to enter the house and remove the central heating would not be exercisable against the tenant. Similarly, a sale or mortgage of the house or other property to which equipment was affixed would in the ordinary case leave the taxpayer company without any rights over such equipment. Yet the grant of such tenancy or the sale or charge by the local authority would normally take place without the knowledge or consent of the taxpayer company. True, such tenancy, sale or charge would constitute a breach of clause 2.8 of the master lease but that would make no difference to the fact that the taxpayer company would enjoy no rights of any kind against the person acquiring the fixtures. In my judgment, Parliament cannot have intended the word "belongs" to produce such a result.
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Robert Goff L.J. [in Costain Property Investments], at p. 771, treated the expression "belonging to" as the same as "owned by." In my judgment that case was rightly decided. The same conclusion must apply to the much lesser rights enjoyed in the present case. A long leaseholder enjoys a legal estate in the land (including the fixtures) which gives him immediate possession and enjoyment of the fixtures. In contrast, in the present case the rights enjoyed by the taxpayer company confer no immediate right of any kind to enjoyment of the property and only nebulous, contingent, future rights so to do." (Melluish v. BMI [1996] AC 454 at 476 - 477, Lord Browne-Wilkinson)
"I agree that 'belong' and 'belonging' are not terms of art. They are ordinary English words. It seems to me that, in ordinary usage, they would not be satisfied by limited interests. For example, I do not think one would say that a chattel 'belongs' to X if he merely had the right to use it for five years." (Stokes v. Costain Property Investments Ltd. [1984] 1 WLR 763)
- Same as "owned by"
"[82] It is also material to observe that the phrase "ceases to own" is expressed in simple, non-technical language which should require no elaboration to unpack its meaning. Neither "ceases" nor "own" is defined, so each word should be given its ordinary and natural meaning; and, as we have seen, "own" is intended to be synonymous with "belongs to" in the predecessor legislation, which was a similarly non-technical and everyday expression." (HMRC v. Altrad Services Limited [2024] EWCA Civ 720, Henderson, Nugee, Whipple LJJ)
"Robert Goff L.J. [in Costain Property Investments], at p. 771, treated the expression "belonging to" as the same as "owned by." In my judgment that case was rightly decided..." (Melluish v. BMI [1996] AC 454 at 476 - 477, Lord Browne-Wilkinson)
- Apply in a real and practical sense
"[83] The question which must therefore be answered is whether, as a matter of ordinary language, and in a real and practical sense, the taxpayers ceased to own the assets which they sold to the Bank as step 1 in the scheme. In answering that question, it is elementary that the scheme must be regarded as a whole, and as it was intended to operate..." (HMRC v. Altrad Services Limited [2024] EWCA Civ 720, Henderson, Nugee, Whipple LJJ)
- No loss of ownership where same assets returned 3 weeks later + T had uninterrupted use in the meantime
"[85] Adopting this holistic approach, and on the basis of the unchallenged facts found by the FTT, I have little hesitation in concluding that the taxpayers did not cease to own the relevant assets within the meaning of section 61(1)(a) when they were sold to the Bank. On the contrary, the whole purpose of the scheme was that the same assets would be returned to the sole beneficial ownership of the taxpayers upon exercise of the put option by the Bank three weeks later, and that for all practical purposes the taxpayers would continue to have the uninterrupted beneficial use of the assets for the purposes of their trade in the meantime. On the FTT's findings, the scheme was entirely tax-motivated and none of the steps in it had any real commercial purpose. Nor was there any real likelihood that any of the steps would not take place in accordance with the plan. In the language of the earlier Ramsay cases, the steps in the scheme were "pre-ordained", although it has been clear since the decision of the House of Lords in Scottish Provident that it may anyway be sufficient to support an application of the Ramsay principle that the scheme in question was in fact implemented as planned, even if there was a real, but remote, possibility that one or more of the steps or contingencies in it might not happen." (HMRC v. Altrad Services Limited [2024] EWCA Civ 720, Henderson, Nugee, Whipple LJJ)
- Brief interruption of legal ownership as part of tax scheme not loss of ownership for purposes of legislation
"[85] Another way of expressing my conclusion would be to say that, on its true construction, section 61(1)(a) was intended by Parliament to operate in the real world of commerce, with the consequence that a brief interruption of the taxpayer's legal ownership of the assets, brought about solely by the scheme and devoid of any commercial purpose apart from tax avoidance, falls outside the scope of the statutory language, and the intermediate steps may therefore be disregarded. So viewed, the case is a good example of the type recognised by Ribeiro PJ in Arrowtown at [35]: see [6] above. It also falls comfortably within the principles stated by the Supreme Court in Rossendale at [11] and [12], quoted in [39] above. If the steps in the scheme are to be disregarded, the end result is that for the purposes of capital allowances the ownership of the assets remained throughout vested in the taxpayers...
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[91] By parity of reasoning, it may be said that, in the present case, the taxpayers did cease for a short period to be the legal and beneficial owners of the assets which they sold to the Bank at the start of the scheme, but that this does not preclude an analysis which looks at the scheme as a whole and concludes that the taxpayers did not, in any real or practical sense, cease to own the assets within the meaning of section 61(1)(a) during the three weeks while the scheme ran its course. There is nothing about the concept of cessation of ownership which positively requires the normal and narrower meaning of the concept to prevail from the moment when the initial sale was completed, even though the sale formed an integral part of a composite transaction designed to return the assets to the full legal and beneficial ownership of the taxpayers three weeks later." (HMRC v. Altrad Services Limited [2024] EWCA Civ 720, Henderson, Nugee, Whipple LJJ)
ENTITLEMENT
'Entitled'
- Does not include a person with no real or practical ability to exercise the entitlement + granted for tax avoidance
"[47] There can be no doubt that the definition of the “owner” of a hereditament in section 65(1) of the 1988 Act as “the person entitled to possession of it” is to be interpreted as denoting in a normal case the person who as a matter of the law of real property has the immediate legal right to actual physical possession of the relevant property. Arden J so held in Brown v City of London Corpn [1996] 1 WLR 1070 as a reason for concluding that the right of a receiver under a debenture to exercise a power to displace the possession of the company which was the tenant of an unoccupied property did not make the receiver the “owner” of the property for the purposes of section 65(1) and thereby liable for business rates. It has not been suggested that that conclusion was wrong. Furthermore, such an interpretation generally accords with the legislative purpose of imposing the liability for business rates on the person who controls whether the property is left unoccupied and on whom the legislation is intended to place an incentive to bring the property back into use for the benefit of the community.
[48] In the unusual circumstances of this case, however, identifying “the person entitled to possession” in section 65(1) of the 1988 Act as the person with the immediate legal right to possession of the property would defeat the purpose of the legislation. As we have explained, the schemes were designed in such a way as to ensure that the SPV to whom a lease was granted had no real or practical control over whether the property was occupied or not and that such control remained at all times with the landlord.
[49] In our view, Parliament cannot sensibly be taken to have intended that “the person entitled to possession” of an unoccupied property on whom the liability for rates is imposed should encompass a company which has no real or practical ability to exercise its legal right to possession and on which that legal right has been conferred for no purpose other than the avoidance of liability for rates. Still less can Parliament rationally be taken to have intended that an entitlement created with the aim of acting unlawfully and abusing procedures provided by company and insolvency law should fall within the statutory description." (Rossendale BC v. Hurstwood [2021] UKSC 16)
- Focus is on transaction under which income arose and not connected transactions
"[52] In Khan, it was held that on a purposive reading of identical words in a different provision of legislation, focus had to be on the particular transaction under which the distribution arose, and not on the connected transactions considered as a composite whole [52]. The same applies here, and the focus must be on the transaction giving rise to the income in question. I do not understand that approach to be disputed in principle although there is a dispute about the way it is applied and with what result." (Good v. HMRC [2023] EWCA Civ 114)
- Person is entitled to income if they assign the right to it and the assignee must use it for their benefit
"[62] In agreement with HMRC's case, I reject the proposition that the taxpayer had completely alienated his rights in the MAPs so as no longer to be entitled to them. That does not reflect the reality of these arrangements. The MAPs were assigned in parallel with the Lender's obligation to use them to discharge the taxpayer's obligations under the Loan. The taxpayer derived a clear benefit from the MAPs, each time they were paid while the Loan remained outstanding, sufficient to mean that the taxpayer remained "entitled to" the MAPs for the purposes of s 611." (Good v. HMRC [2023] EWCA Civ 114)
- Extends beyond beneficial entitlement
"[74] A preliminary point to note is that both cases concerned taxing provisions that impose a charge on the person "receiving or entitled to" income. That is different to the language that we are concerned with. For example, it can include a person who receives income solely as a trustee.
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[80] ... The concept of "receiving or entitled to" income is a broad one that extends beyond beneficial entitlement, and in any event Mr Khan and Mr Good obtained real benefits from the payments to them, in a way that Houmet was not found to have done. In Khan the taxpayer became the owner of the company, as intended, and benefited from the distribution because it enabled him to satisfy a liability that he had undoubtedly taken on. Further, the transaction could not readily be recharacterized as involving a distribution to the sellers who had already transferred their shares. In Good, the taxpayer benefited through the reduction of his liability under the loan." (Hargreaves Property Holdings Limited v. HMRC [2024] EWCA Civ 365, Falk, Jackson, Nugee LJJ)
- Subsidiary not deprived of entitlement to occupy because lease is from parent that controls it
"[61] It may be that other factual situations may demonstrate that this test needs some further adjustment. For example the letting of unoccupied business property by a parent company to a wholly owned and controlled subsidiary would not of itself cause the subsidiary to fail to satisfy the ownership test merely because the management of the affairs of the subsidiary (including whether to bring the premises back into occupation) rested with the parent’s board. We would, however, reject the criticism that the test is insufficiently certain. In any ordinary case the test will easily be satisfied by identifying the person who is entitled to possession as matter of the law of real property. The fact that the law of real property may not prove a reliable guide in an unusual case of the present kind is not in our view an objection to our preferred interpretation. The value of legal certainty does not extend to construing legislation in a way which will guarantee the effectiveness of transactions undertaken solely to avoid the liability which the legislation seeks to impose." (Rossendale BC v. Hurstwood [2021] UKSC 16)
Beneficial entitlement
- Refers to a person with the benefits of ownership
"[49] First, while perhaps not strictly a term of art, the concept of beneficial ownership is well established: Sainsbury. In essence, it means ownership for the benefit of the person in question: Wood Preservation.
[50] Secondly, there is a significant degree of overlap between beneficial ownership and equitable ownership. In particular, a purchaser under a specifically enforceable contract can have beneficial ownership of the asset it has agreed to buy: Parway Estates. However, the concepts are not entirely co-extensive: Sainsbury and Bupa. (I note that one reason why this must be so is that the concept of beneficial ownership needs to be capable of operating in legal systems that do not have the same legal traditions, including – as was fairly pointed out in Bupa – Scotland.)
[51] Thirdly, the fact that the concept of beneficial ownership is well established does not mean that the usual approach to statutory construction is to be ignored. In each of Wood Preservation, Sainsbury and Bupa the term was construed in the context of the legislative scheme in question. As I have already explained, and whatever terminology is used, legislation must be construed purposively to ascertain whether it was intended to apply to the transaction, viewed realistically.
[52] Fourthly, consistent with the fundamental requirement of ownership for the benefit of the person in question, or "ownership with benefits", a person who is the legal owner of property will not be its beneficial owner if they do not in fact have any of the benefits of ownership, such that they hold only a "mere legal shell". The facts of Wood Preservation provide a good example of this. The parent company could derive no economic benefits from the shares, whether through dividends, disposal or otherwise, but was instead compelled to transfer them to the purchaser as soon as the condition was satisfied or waived at the purchaser's option. (The position would no doubt have been the same if the shares had been registered in the name of a nominee and the parent company's title was therefore equitable. It would still have lost the benefits of ownership as a result of the terms of the sale.)
[53] Fifthly, in certain circumstances it is possible for a property owner not to possess, or to lose, beneficial ownership without it vesting anywhere else: Ayerst.
[54] Finally, I would agree with the Upper Tribunal in Bupa that the concept of "beneficial entitlement" should be construed with regard to the authorities that consider the concept of beneficial ownership. In broad terms, therefore, it can be construed as "entitlement with benefits". If the person in question would, in truth, have none of the benefits that entitlement would ordinarily bring, they will not be beneficially entitled." (Hargreaves Property Holdings Limited v. HMRC [2024] EWCA Civ 365, Falk, Jackson, Nugee LJJ)
- Meaning in domestic legislation may differ from international fiscal meaning
"[56] In my view the FTT was right to say at para. 130 that the concept of beneficial entitlement in s.933 ITA 2007 should not be interpreted in accordance with the approach taken by the Court of Appeal in Indofood. We are concerned with domestic tax legislation and not an "international fiscal meaning"." (Hargreaves Property Holdings Limited v. HMRC [2024] EWCA Civ 365, Falk, Jackson, Nugee LJJ)
- Back to back contractual arrangements for the receipt and payment of interest meaning that the intermediary is not beneficially entitled to it
"[28] The exception in s. 933 thus looks to the practical reality of whether there are sums that can readily and fairly be collected from a UK resident company. That function suggests that the term “beneficially entitled” in s. 933 does not only exclude situations where the recipient is a fiduciary, but may also (depending on the particular circumstances) exclude situations where the commercial and practical reality of the matter is that the interest, once received by the UK resident company, is then paid on to an entity outside the UK, because in that situation there is the same underlying concern that tax on the income will not in practice be able to be collected.
[29] We also agree with Mr Vallat that it would be extraordinary if one could avoid the imposition of the s. 874 collection mechanism simply by interposing a company such as Houmet, which has no commercial function other than to sidestep the withholding provisions. Purposively construed, the exception is drawn for the benefit of UK companies who are substantively entitled to receive and enjoy the income, not those who are beneficially entitled only in the narrower technical sense used to distinguish between legal and equitable interests in English common law.
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[33]...Section 933 is therefore a provision for which the lack of business purpose for the company’s involvement in receiving the interest is relevant in considering whether the company is beneficially entitled to the sum." (Hargreaves Property Holdings Limited [2023] UKUT 120 (TCC), Bacon J and Judge Raghavan)
POSSESSION
- "Person entitled to possession" does not include a company with no real or practical ability to exercise legal right to possession
"[49] In our view, Parliament cannot sensibly be taken to have intended that “the person entitled to possession” of an unoccupied property on whom the liability for rates is imposed should encompass a company which has no real or practical ability to exercise its legal right to possession and on which that legal right has been conferred for no purpose other than the avoidance of liability for rates. Still less can Parliament rationally be taken to have intended that an entitlement created with the aim of acting unlawfully and abusing procedures provided by company and insolvency law should fall within the statutory description.
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[51] We emphasise that this conclusion is not founded on the fact that the defendant’s only motive in granting the lease was to avoid paying business rates, although that was undoubtedly so. If the leases entered into by the defendants had the effect that they were not liable for business rates, their motive for granting the leases is irrelevant. Nor does it illuminate the legal issues to use words such as “artificial” or “contrived” to describe the leases, when it is now accepted that they created genuine legal rights and obligations and were not shams. Our conclusion is based squarely and solely on a purposive interpretation of the relevant statutory provisions and an analysis of the facts in the light of the provisions so construed." (Hurstwood Properties (A) Ltd v. Rossendale BC [2021] UKSC 16)
- May require the person to be able to occupy as if they were owner
"[73] If a buyer enters property unlawfully, without the consent of the seller, that cannot constitute "possession" for this purpose.
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[78] I consider that it is appropriate to adopt a purposive approach to section 44(4) which is an anti-avoidance provision. It is not uncommon for sellers to allow buyers to enter a property between contract and completion for various purposes. Not every entry will constitute taking possession. Bearing in mind the purpose of the section, in my view "taking possession of the subject matter of the contract" requires the buyer to go into occupation of the property as if they had become the owner at that point. They may have to comply with conditions or limitations under the contract, lease, licence or other agreement, but there must be an element of freedom to occupy as and when they wish, including all the time, a right to any rents from the property if relevant (specifically dealt with in section 44(6)(a)) and generally, responsibility for the property and liability for the outgoings. As HMRC puts it in its SDLT Manual, the purchaser "obtains "the keys to the door" and is entitled to occupy the property".
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[80] Having considered all the evidence and weighed the various factors, I conclude that Mr Goldsmith did not "take possession" of the Property when his contractor entered it to carry out the conversion works." (G Goldsmith Limited v. HMRC [2024] UKFTT 927 (TC), Judge McKeever)
RIGHT
- Normally connotes an enforceable legal entitlement
"[68] ... Further, the concepts of "rights" and "duties" connote legal enforceability, whether that is to be found in a relevant statute, in the contractual agreement governing the LLP, or in a combination of the two. Conversely, influence over the affairs of the LLP which lacks any identifiable contractual and/or statutory source in the specified rights and duties is excluded from consideration of the kind of influence which counts for the purposes of Condition B, although it may remain highly material in deciding whether the influence that does qualify ("qualifying influence") is "significant" when assessed in the light of any "non-qualifying influence" which may be found to exist on the facts of the given case." (HMRC v. Bluecrest Capital management (UK) LLP [2025] EWCA Civ 23, Henderson, Lewison, Arnold LJJ)
"[75] I fully accept that the PIP scheme must be critically examined as a whole, and that the statutory concept of a "right" to share in the profits of the partnership's trade in section 850(2) of ITTOIA 2005 is not in principle immune from a Ramsay approach which might, in an appropriate context, give it a broader meaning than an enforceable legal entitlement, which is what I take to be the normal connotation of a "right"..." (HMRC v. Bluecrest Capital Management LP [2023] EWCA Civ 1481, Henderson, Lewison, Falk LJJ)
- Purposive approach may, depending on the context, lead to broader concept
"[75] I fully accept that the PIP scheme must be critically examined as a whole, and that the statutory concept of a "right" to share in the profits of the partnership's trade in section 850(2) of ITTOIA 2005 is not in principle immune from a Ramsay approach which might, in an appropriate context, give it a broader meaning than an enforceable legal entitlement, which is what I take to be the normal connotation of a "right". But any wider approach of that nature could only be justified if, as in Rossendale, the statutory purpose of the relevant provision can be safely identified, and the wider meaning, when realistically applied to the facts, is needed to prevent the frustration of Parliament's intention in enacting it. That is where, in my view, HMRC's supposedly purposive approach to the construction of section 850 breaks down. The purpose of section 850 is to determine the shares of the partners in the actual profits of the partnership trade for the relevant accounting period, and this can only be done by examining the rights of the partners, including the corporate partner, to share in them. There is nothing illusory, or unreal, about the share allocated to the corporate partner, and it cannot therefore be simultaneously treated as consisting of separate slices of profit allocated to the participating PIP partners in addition to their direct shares." (HMRC v. Bluecrest Capital Management LP [2023] EWCA Civ 1481, Henderson, Lewison, Falk LJJ)
- Query whether future of contingent rights are included
"[77] There was some discussion at the hearing before us whether a "right" to share in profits for the purposes of section 850 could extend to rights which were future or contingent, and (if so) how such rights should be valued. Although the discussion was inconclusive, and I would not wish to express a firm view, my provisional inclination would be not to rule out the possibility that such rights might in some way be relevant, but to stress that in practice there would probably be little scope for taking them into account, because the entirety of the partnership's trading profits has to be allocated between the partners in Year 1, and not at any future date. I therefore find it hard to see how, for example, on HMRC's case, a contingent expectation of an award of special capital, up to three years in the future, could properly be taken into account when the profits are allocated in Year 1, even assuming that it is properly to be characterised as a "right" at all. But the point does not need to be resolved, since the fatal objection to such an analysis is that, on any realistic view, it would not be a right to share in the partnership's profits, which is what section 850 requires, but rather a right to share in future special capital beneficially owned by the corporate partner and funded by the corporate partner's own post-tax profits." (HMRC v. Bluecrest Capital Management LP [2023] EWCA Civ 1481, Henderson, Lewison, Falk LJJ)