In HMRC v Curzon CapitalLtd [2019] UKFTT 63 (28 January 2019), the FTT found that the provider of administration services for the implementation of a scheme was not a promoter under DOTAS (FA 2004 s 307), so that HMRC’s application for an order that a scheme was notifiable was refused.
Curzon Capital (CCL) was set up as a ‘small corporate finance adviser’. It acted as a sponsor and operator of a number of unregulated collective investment schemes and provided investment advice and financial administration services of various types. The appeal related to administration services CCL had provided in relation to arrangements (called ‘Capital contracts’), which were designed by a firm of advisers to reduce the taxable employment income of participants. These arrangements were known to HMRC as a ‘contractor scheme’. A participant became a ‘member of an LLP/trust structure’, through which their services were offered back to their previous employer, with the participant receiving ‘82% of the gross earnings through the administrator on a monthly basis’, by way of loan.
This was an application by HMRC for an order that the arrangements were notifiable (s 314A).
The FTT found that the arrangements fell within s 306(1)(a), as their purpose was clearly the obtaining of a tax advantage. Whether they were notifiable then depended on whether they fell within any of the ‘descriptions prescribed by regulations’ (the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations, SI 2006/1543).
The first description was contained in reg 8(2); it might be reasonably expected that the notional promoter be able to obtain a premium fee for making the arrangements available. Whether CCL actually obtained such a fee was irrelevant. The FTT found that: ‘The general presentation of the arrangements, including the level of detail provided and their fulsome endorsement by specialist leading counsel, was clearly directed to the serious potential scheme user and, as such, it would be reasonable to expect that a premium fee would be obtainable.’
The FTT then considered whether the ‘standardised tax product’ description contained in reg 10 also applied. The FTT found that the arrangements had ‘standardised, or substantially standardised, documentation ... the purpose of which was to enable the implementation, by the client, of the arrangements’. The arrangements were therefore notifiable and the FTT had to decide whether CCL was a promoter for the purpose of s 307.
The FTT observed that s 307(2) requires an assessment of the nature of the overall trade, profession or business through which the relevant services were provided (and whether that trade, profession or business involves the provision of services relating to taxation), rather than the nature of the specific activities which took place. It found that the phrase ‘services relating to taxation’ is ‘sufficiently broad in meaning to cover the activity of administering a tax avoidance scheme, even when doing so without any clear knowledge of the detailed way in which it is intended to work’.
However, for CCL to be a promoter, it had to make ‘firm approaches’ with a view to making the arrangements available for implementation. The FTT noted that CCL was not in a position to make the arrangements available. It was therefore not a promoter.
Why it matters: The FTT observed that: ‘There has been no consideration in the decided cases of the significant issues in this application.’ This was the first time the meaning of ‘promoter’ was judicially considered. In addition, the case was unusual in that HMRC was applying for an order that arrangements were notifiable.
In HMRC v Curzon CapitalLtd [2019] UKFTT 63 (28 January 2019), the FTT found that the provider of administration services for the implementation of a scheme was not a promoter under DOTAS (FA 2004 s 307), so that HMRC’s application for an order that a scheme was notifiable was refused.
Curzon Capital (CCL) was set up as a ‘small corporate finance adviser’. It acted as a sponsor and operator of a number of unregulated collective investment schemes and provided investment advice and financial administration services of various types. The appeal related to administration services CCL had provided in relation to arrangements (called ‘Capital contracts’), which were designed by a firm of advisers to reduce the taxable employment income of participants. These arrangements were known to HMRC as a ‘contractor scheme’. A participant became a ‘member of an LLP/trust structure’, through which their services were offered back to their previous employer, with the participant receiving ‘82% of the gross earnings through the administrator on a monthly basis’, by way of loan.
This was an application by HMRC for an order that the arrangements were notifiable (s 314A).
The FTT found that the arrangements fell within s 306(1)(a), as their purpose was clearly the obtaining of a tax advantage. Whether they were notifiable then depended on whether they fell within any of the ‘descriptions prescribed by regulations’ (the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations, SI 2006/1543).
The first description was contained in reg 8(2); it might be reasonably expected that the notional promoter be able to obtain a premium fee for making the arrangements available. Whether CCL actually obtained such a fee was irrelevant. The FTT found that: ‘The general presentation of the arrangements, including the level of detail provided and their fulsome endorsement by specialist leading counsel, was clearly directed to the serious potential scheme user and, as such, it would be reasonable to expect that a premium fee would be obtainable.’
The FTT then considered whether the ‘standardised tax product’ description contained in reg 10 also applied. The FTT found that the arrangements had ‘standardised, or substantially standardised, documentation ... the purpose of which was to enable the implementation, by the client, of the arrangements’. The arrangements were therefore notifiable and the FTT had to decide whether CCL was a promoter for the purpose of s 307.
The FTT observed that s 307(2) requires an assessment of the nature of the overall trade, profession or business through which the relevant services were provided (and whether that trade, profession or business involves the provision of services relating to taxation), rather than the nature of the specific activities which took place. It found that the phrase ‘services relating to taxation’ is ‘sufficiently broad in meaning to cover the activity of administering a tax avoidance scheme, even when doing so without any clear knowledge of the detailed way in which it is intended to work’.
However, for CCL to be a promoter, it had to make ‘firm approaches’ with a view to making the arrangements available for implementation. The FTT noted that CCL was not in a position to make the arrangements available. It was therefore not a promoter.
Why it matters: The FTT observed that: ‘There has been no consideration in the decided cases of the significant issues in this application.’ This was the first time the meaning of ‘promoter’ was judicially considered. In addition, the case was unusual in that HMRC was applying for an order that arrangements were notifiable.
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