© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H12. Timing
Present tense
- Use of present tense not meaning that omission to exercise right must immediately lead to increase in another's estate (IHT)
"[92] I do not consider there is any mandate to import a temporal requirement into the subsection, requiring an immediate temporal link between the reduction in one estate and the increase in the other. There is a correlation of substance between the reduction and the increase, in that one results from the other, but they need not occur at precisely the same time. The use of the present tense upon which the appellants rely, does not dictate such a requirement. The present tense is used to identify two separate states of affairs which have to exist (“is diminished” and “is increased by”) but it does not follow that they have to exist at the same time or, putting it more exactly, one immediately following the other.
[93] That is not to say that questions of timing will be irrelevant to a determination of whether the subsection is satisfied. I agree with HMRC’s submission that, as with all questions of causation, the evaluation of whether “another person’s estate … is increased by the … omission to exercise a right” requires consideration of all the facts and circumstances. I turn therefore to look at the wider causation argument, bringing in the scheme administrator’s discretion." (Parry v. HMRC [2020] UKSC 35, Lady Black)
Same day
- Nonsensical gap in the period looked at by an anti-avoidance provision would be absurd
"[60] In short, the FTT and UT were correct to conclude that the proviso does not contain a loophole that permits transactions earlier on the same day of the distribution to escape its application, a result which would be absurd.
[61] The difficulty with the drafting is that the term "effective date" is defined in s.119 FA 2003 as a particular date, generally the date of completion. It is a concept used throughout the legislation – Ms Shaw told us that it was used almost 200 times – with no indication of any scope to treat it as referring to a particular time on a day. Accordingly, read literally, s.54(4)(b) appears to refer to a three year period ending on the day immediately before completion, in this case 4 July rather than 5 July 2011. But that would leave a nonsensical gap between midnight on that date and the completion of the relevant transaction on the following day.
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[70] Similarly, in this case Parliament cannot have intended the operation of the proviso to be avoided by the simple expedient of ensuring that the transaction qualifying for group relief was entered into after, rather than before, midnight on the effective date." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588, Falk LJ)
- Tax paid on the 29th day is unpaid on the day following the expiry of 28 days
"[49] We were referred to the case of Thomson (Inspector of Taxes) v Minzly, [2002] STC 450. In this case, Mr Minzly owed tax that was due on 31 January 2000. He paid it during the course of the day on 29 February. The question in that case was whether the tax remained "unpaid on the day following the expiry of 28 days from the due date" when it was paid during that day. The High Court agreed with HMRC that the tax was unpaid on that day because it remained unpaid in the earlier part of that day." (Herrmann v. HMRC [2026] UKFTT 715 (TC), Judge McGregor)
On
- "On" the transfer does not require it be at the time of the transfer
"[53] In reaching this conclusion I am not persuaded by the appellant's argument that the preposition "on" in the phrase "amount payable on the transfer" can only denote amounts payable on the exercise of the Option, and not on the acquisition of the Option. The word "on", like other prepositions, has very limited independent semantic content. It takes its meaning from its surrounding words. The word "on" may be used in a wide variety of ways, including as part of the description of a physical position, as a way of identifying a date or time, or to indicate a relationship between two or more things. Ms Nathan accepted that the word "on" did not require the relevant amount to be payable simultaneously with the transfer of property in the security – the amount might be payable before or after that moment. So this is not a case where the word is being used to identify a date of payment. She submitted instead that it was intended to denote amounts payable "on the occasion of the transfer". She said that reading was narrower than (say) the amounts "payable for the transfer".
[54] I do not accept this submission. For the reasons given above, the inputs into paragraph 14A(3) are themselves to be given a purposive, practical meaning. The words on either side of the word "on" are "the amount payable" and "the transfer [of a strip]". There is no difficulty in reading the words purposively as including the amount payable for (or in return for) the transfer. And, for the reasons already given, approaching the facts realistically, in my view it would be unduly artificial to say that Investec only had to pay £150,000 on (in the sense of in return for) the transfer of the strip, when it actually had to pay nearly £1.5 million to acquire them." (Watts v. HMRC [2025] EWCA Civ 1615, Miles, Lewison, Arnold LJJ)
- "On" retirement requires retirement to be the trigger
"In context, and indeed on the ordinary and natural reading of the words, subsection 1(5) is defining the circumstances in which a scheme provides for benefits to be provided. The key word is "on". To be a pension scheme within the meaning of section 1(5), the scheme must provide, or be capable of providing, benefits to people "on retirement" or "on termination of service" not during, or after, or coincident with, retirement or termination of service. The occurring of one of the events specified in section 1(5)(a) to (c) must be the event, or the trigger, giving rise to the entitlement to benefits. That conclusion is reinforced by the use of the word "on" in section 1(5)(b). A scheme will be a pension scheme if it provides benefits "on a person having reached a particular age". It is clear that having reached the particular age is the event which gives rise to the entitlement to benefits." (Clark v. Chief Constable of Derbyshire [2024] EWCA Civ 676, Lewis, Underhill, Warby LJJ)