30 May 2023

Hargreaves v HMRC

The UT dismissed the taxpayer’s appeal against the decision of the FTT.

The FTT held that the taxpayer had a duty to deduct withholding tax pursuant to s. 874 Income Tax Act 2007 (“ITA 2007”) on interest payments that it made with the exception of certain de minimis amounts.

The four grounds of appeal brought by the taxpayer were rejected.  The UT considered that: (i) the exception to the withholding obligation in ITA 2007 s. 933 had to be construed purposively in line with Ramsay.  This requirement was not displaced by the High Court’s view of “beneficial entitlement” in a different context; (ii) a direction under the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 is needed to switch off an interest payer’s withholding obligation and a claim would also have been required to seek the benefit of the UK/Guernsey double tax treaty; (iii) taking a business-like approach rather than adopting a dry legal assessment the interest payments were yearly; and (iv) following Admore CA the FTT was plainly entitled to reach the conclusion that the interest payments arose in the UK.

Richard Vallat KC and Calypso Blaj appeared for HMRC.

To view a copy of the decision please click here.