DN's latest tax avoidance analysis is flawed

https://www.taxpolicy.org.uk/2023/03/30/football/

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New report: how Premier League Football clubs have avoided £470m of tax, and how to stop it – Tax Policy Associates Ltd

https://www.taxpolicy.org.uk/2023/03/30/football/

"In relation to income tax and national insurance, modern caselaw has established that these taxes apply realistically to the actual commercial transaction, and not to artfully constructed paperwork"

Premier League clubs avoided £250m in tax, expert estimate - BBC News

https://www.bbc.co.uk/news/uk-65097761

"An HMRC spokesperson added: "Dual representation cannot be assumed to be a tax avoidance scheme; its use can be tax compliant.""

HMRC are right, and contrary to DN's claims, this HL case does not say or even suggest that the terms of these 50/50 football agent contracts should not be respected for tax purposes, assuming they are not shams (which they clearly aren't under the case law below).

https://publications.parliament.uk/pa/ld200405/ldjudgmt/jd041125/barc.pdf

Far from it. Per para 21 here (and ignoring VAT), it's all about what are the relevant realistic facts (in the context of the relevant legislation construed purposively) and that's always a question of fact for the judge(s) based on witness evidence and all the rest of it:

https://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07074.html

If these are genuine, valid agreements, then they are the actual commercial transaction and their terms cannot simply be disregarded under the above HL case law as not being the actual commercial transaction. A judge can however decide whether or not the realistic facts as found accord with the (purported) actual commercial transaction or not (if they do not then it's wrong to say that the realistic facts as found under Ramsay then become the actual commercial transaction - no judge has ever said that's the modern Ramsay principle to my knowledge and see below re separate "substance vs. form" and "real deal" case law that also consider realistic facts and that in contrast may instead represent the actual commercial transaction to the extent the paper one is thereby merely artificial form that can be ignored in favour of the actual substance).

The appropriate initial analysis here in my view is that in the above image rights case, where on a substance vs. form analysis (which like Ramsay is not necessarily confined to tax cases) the realistic facts were that the salary was dressed up as image rights; a bit like with the dividends in PA Holdings that did not actually require a Ramsay analysis (because under a substance vs. form analysis it wasn't really a dividend in the 1st place - see para 28) and the contractual starting point for that analysis is essentially no different to whether substitution clauses should be valid under self-employment vs. employment case law and if properly drafted they should be (all else being equal with no dodgy side letters etc.). See: https://www.taxation.co.uk/articles/how-one-word-in-a-clause-can-fail-a-...

Only after considering the actual contract terms as above and that substance vs. form realistic facts analysis should the modern Ramsay analysis be applied in the alternative (which under a purposive interpretation can ignore otherwise legally valid steps for tax purposes only usually or stretch/narrow the literal meaning of the legislation to the realistic facts (so that p*ss-taking that would otherwise happen with the legislation is defeated - but that has its limits e.g. Mayes where only a literal statutory interpretation could apply).

Alternatively, other than PA Holdings substance vs. form there is other quasi sham case law he failed to cite about what is the "real deal" between the parties or mislabelling, where the paperwork does not (fully and/or accurately) include/represent the correct/real deal terms (e.g. lease/licence case law), which is similar to the PA Holdings substance vs. form case law and different to the modern Ramsay case law. 

So in short, DN's above statement elides case law on realistic facts with findings of realistic facts based on that case law - which is a job solely for a judge based on the evidence and I can't easily see how DN and others are able to confidently prejudge the answer there (equally I'm not saying they're wrong, but to me it looks far from a slam dunk for HMRC if the 50/50 contract drafting is in order and the parties have not acted inconsistently with that).

Replies (18)

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By Justin Bryant
30th Mar 2023 19:57

I note John Barnett (who's a very bright, knowledgeable bloke) also disagrees with DN's tax law/factual analysis for similar reasons to me (in the comments section of the above link).

https://www.burges-salmon.com/our-people/John-Barnett

I note it's on BBC Newsnight tonight and inevitably John's and my points will be totally glossed over or not even understood by the biased, ignorant BBC.

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Replying to Justin Bryant:
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By justsotax
06th Apr 2023 12:19

hey do have a tory stooge at the top.....misinformation is their speciality.....

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By Justin Bryant
06th Apr 2023 12:11

Unlike the NZ affair, this looks like a bit of a damp squib to me. See: https://www.taxjournal.com/articles/tax-the-role-of-football-agents

Re TPA's use of the word "obvious", I am reminded of para 50 here re "open & shut cases" etc.

https://www.bailii.org/uk/cases/UKUT/TCC/2023/86.html

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Replying to Justin Bryant:
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By Justin Bryant
14th May 2024 16:24

HMRC seem to agree it's at least partly a damp squib: https://www.gov.uk/government/publications/help-with-football-agents-fee...

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Replying to Justin Bryant:
Stepurhan
By stepurhan
14th May 2024 16:36

Given you have repeatedly, and with good reason, castigated HMRC for poor understanding of tax law in the past, I'm not sure why you are flagging them agreeing with you as a good thing now.

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Replying to Justin Bryant:
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By Justin Bryant
15th May 2024 10:25

HMRC will of course have an uphill struggle here per para 143 here and the TJ article below: https://www.bailii.org/ew/cases/EWHC/Ch/2024/1082.html

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By Justin Bryant
21st Apr 2023 12:42

Paras 16(1) , 20(5)-(10) and 22-24 (and para 27 re quantum) of this VAT case seem to support my above view (although per para 47 there was a quirk re a waiver agreement on these particular facts, but that does not change the basic principle/analysis here and indeed given the FTT's view this now looks like good, sensible tax planning - DN will be fuming presumably): https://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j12718/TC...

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By Justin Bryant
17th Jun 2023 08:07

A recent example of sham, that requires no Ramsay analysis (but is never a simple thing for HMRC to prove) is here: https://www.taxjournal.com/articles/what-a-sham

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By Justin Bryant
20th Jul 2023 16:52

More flawed analysis by DN here, this time re SDLT.

https://www.taxpolicy.org.uk/2023/07/19/islamicfinance/

The Youtuber referred to an onward sale to the bank and leaseback and in this s71A FA 2003 structure it is the customer who pays the SDLT (not the bank).

You'd think DN would have at least got this SDLT analysis right, considering CC's involvement with PB's failed SDLT avoidance scheme that used such Islamic finance structures.

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Replying to Justin Bryant:
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By Waves
20th Jul 2023 18:18

Justin Bryant wrote:

More flawed analysis by DN here, this time re SDLT.

https://www.taxpolicy.org.uk/2023/07/19/islamicfinance/

The Youtuber referred to an onward sale to the bank and leaseback and in this s71A FA 2003 structure it is the customer who pays the SDLT (not the bank).

You'd think DN would have at least got this SDLT analysis right, considering CC's involvement with PB's failed SDLT avoidance scheme that used such Islamic finance structures.

Have you informed DN of the error you have identified?

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Replying to Waves:
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By Justin Bryant
21st Jul 2023 09:23

I just scrolled through the comments on Youtube and this bloke has got it 100% right: https://www.youtube.com/watch?v=pLBMkDP7Umw&t=2s

"@nickbeecham4140
1 day ago
This would indeed be shocking if it were true but it isn't. The relief for Sharia compliant financing is intended to put its customers in the same position for SDLT purposes as a purchaser using a traditional English mortgage. The difficulty with Sharia structures is that they of necessity create additional property transactions which would give rise to multiple layers of SDLT without a specific exemption. The exemption to which you refer is found in s71A FA 2003 and indeed does exempt the onward sale and lease back to/from the financial institution. You say that the original purchaser is exempt from SDLT by reason of the immediate onward sale but that relief does not apply if the onward sale is itself exempt under s71A. See Para 16(5)(b) Sch 2A FA 2003.
Reply"

No-one has replied to that (unsurprisingly, as it's mostly just ignorant comments from the usual internet dummies). I don't see why I should explain basic stuff like this to DN (who holds himself out as some sort of self-appointed, virtue signalling tax guru with an irony bypass). Furthermore, there's no need, as my comments here are known to get plagiarised on his website (and passed off as "original analysis") anyway (a compliment I suppose).

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By Justin Bryant
13th Sep 2023 16:41

Just seen this. https://www.taxpolicy.org.uk/2023/09/13/property118/

Lots of errors again by DN. See a proper LR analysis here.
https://www.accountingweb.co.uk/any-answers/interesting-thing-about-btl-...

I would be surprised to put it mildly if HMRC took the s162 point re the (totally worthless) bare trust legal title interest and I believe I explained either in the above link or elsewhere how that can be easily solved anyway.

His breach of mortgage terms rant is his typical sensationalised garbage and it won't affect the tax analysis in any event. See:

https://www.accountingweb.co.uk/any-answers/can-you-put-a-property-into-...

If he were right there, then Mrs Jones could not do a DoT in favour of her husband on his deathbed re CGT MV uplift planning for her mortgaged BTL etc.

He's laughably wrong on or totally misunderstands the "Capital gains value shifting" point.

As for DoTAS, see: https://www.accountingweb.co.uk/any-answers/interesting-taxpayer-win-tax...

Also, I can't see how claiming s162 relief for BTLs is not grandfathered and a positive tax opinion re DoTAS neutralises any potential DoTAS penalty anyway.

I would much rather hear from DN about his previous firm's involvement (where he was head of tax) with this country's biggest ever failed SDLT avoidance scheme (but that's all confidential he'll (rightly and conveniently) say).

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Replying to Justin Bryant:
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By Justin Bryant
07th Nov 2023 10:56

The fact that a transfer of a beneficial interest in an asset is OK re s162 (even though the transferor also has rights re the legal title) is confirmed in the CIR v Gordon (64TC173) case mentioned here (but that particular BO point is not mentioned there):

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65710

In any event, if you transfer beneficial interest in a property to a company and hold title as bare trustee, the latter should not affect the availability of s162 TCGA relief as s60 clearly provides that property held under a bare trust is treated as owned by the BO for the purposes of the Act (so including s162).

Very poor of DN to overlook basic s162 case law/legislation like that.

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Replying to Justin Bryant:
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By Justin Bryant
15th Nov 2023 11:33

Great minds think alike. I've only just found (accidentally from a Google search for something else) that the KCs who support P118's planning agree with me re the above case and DN's counter-arguments there are quite simply irrelevant nonsense. See:

https://taxpolicy.org.uk/assets/TPAL_markup_of_KC_summary.pdf

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By Justin Bryant
29th Sep 2023 13:13

DN is now saying the UK/India Estate DTA is an obscure tax loophole!

https://www.taxpolicy.org.uk/2023/09/28/obscure_loophole/

Surely he should know better and this overly dramatic sensationalisation of this straightforward IHT relief makes him look rather silly (it's a very long standing, well-understood IHT treaty relief for goodness sake - how can such a relief ever be described as a "loophole", unless you're very biased indeed against anyone wealthy not paying as much tax as they possibly can?). Any decent tax adviser should know this is pretty basic IHT stuff and they could get sued for not advising their clients to take advantage of it where appropriate. See:

http://www.taxbar.com/wp-content/uploads/2016/01/Treaties_Which_Override...

He also overlooks the fact that if she stays in the UK too long she could lose her Indian domicile of origin and gain a UK domicile of choice under English common law, whereby this so-called IHT loophole would vanish in a puff of smoke.

Why doesn't he instead write about this interesting statistic about the wealthy I wonder?

"in addition, the top 1% of Income Tax payers were liable for 29.1% of total Income Tax in 2020 to 2021. This is projected to decrease to a 28.5% share of total Income Tax by 2023 to 2024"

https://www.gov.uk/government/statistics/income-tax-liabilities-statisti...

Or this?: https://www.bbc.co.uk/news/uk-politics-66945729?at_medium=RSS&at_campaig...

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By Justin Bryant
29th Nov 2023 11:33

DN's footnote 10 here re P118 incorporations is total garbage.

https://www.taxpolicy.org.uk/2023/11/09/badly/

Hopefully there is now no-one left on Aweb (other than the usual ignorant troll(s)) who wrongly thinks the creditor needs to approve an assumption of the debt from their debtor for that debt assumption to be legally valid (for tax purposes) vis-à-vis the debtor (who continues to be liable to the original creditor of course) and their counterparty - as debated here ad nauseam.

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Replying to Justin Bryant:
Stepurhan
By stepurhan
29th Nov 2023 12:52

Justin Bryant wrote:

DN's footnote 10 here re P118 incorporations is total garbage.

https://www.taxpolicy.org.uk/2023/11/09/badly/

Hopefully there is now no-one left on Aweb (other than the usual ignorant troll(s)) who wrongly thinks the creditor needs to approve an assumption of the debt from their debtor for that debt assumption to be legally valid (for tax purposes) vis-à-vis the debtor (who continues to be liable to the original creditor of course) and their counterparty - as debated here ad nauseam.


Are you saying that the original debtor DOES still remain liable, even if someone else assumes responsibility for the debt without the agreement of the external third party?

Because, if so, your failure to make that point clear is the source of all the debate here. You posts have always made it appear that you think the original debtor is in the clear, even if the third party doesn't even know what has happened.

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Replying to Justin Bryant:
By Ruddles
29th Nov 2023 19:48

Yet again no-one is arguing - and it has been made painfully clear on a multitude of occasions- that the creditor need not give consent for a debt to be treated as assumed for tax purposes. The point - that you continue to ignore, deliberately or inadvertently I have no idea - is whether the original debtor can be legally freed of his obligations without the consent of the creditor. Every single argument on the topic began with the question about legal transfer of the debt. It had nothing to do with tax - if is you that keeps bringing tax into the discussion as if it were relevant - it is not relevant to the point in hand.

I’ll try again with a simple example but since you have already ignored it 3 times I won’t hold my breath. You lend me £100k. I enter into a binding contract with my brother who agrees to repay the loan. All without your knowledge and/or consent. My brother defaults. Who are you going to take to court and why?

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