“… HMRC's submission that nuanced differences of fact, such as the implementation of the schemes, potentially leading to Rule 18(4) applications is a reason not to make a Rule 18 Direction; such potential exists in the making of any Rule 18 Direction. In my view it is not appropriate to speculate as to what action Appellants may or may not choose to take in relation to their appeals. It is the Appellants who seek this Direction and it is the decision on the common issues that is binding; if Appellants subsequently seek to argue they should not be bound by the decision on related issues the Tribunal will decide the application on the merits. For those reasons I agree with and adopt the words of Judge Mosedale in 288 Group at [41]: ‘The difficulties which are likely to arise are where the parties dispute whether the facts in the related cases are sufficiently similar such that the decision on law in the lead case actually applies and binds the related case. Nevertheless, it seems to me that even this is a fairly weak objection in that Tribunals and courts regularly have to decide whether a case is distinguishable on the facts in order to decide whether the decision on the law by a superior court is binding.’” ‘The difficulties which are likely to arise are where the parties dispute whether the facts in the related cases are sufficiently similar such that the decision on law in the lead case actually applies and binds the related case. Nevertheless, it seems to me that even this is a fairly weak objection in that Tribunals and courts regularly have to decide whether a case is distinguishable on the facts in order to decide whether the decision on the law by a superior court is binding.’”
“(i) Whether the payments of money made by each relevant company to each relevant employee were taxable as earnings irrespective of the resolution of issues (ii) to (v). (ii) Whether the arrangements gave rise to a “contract for differences or a contract similar to a contract for differences” within s 420(1)(g) and (4) ITEPA and therefore a “security” and an “employment related security” for the purposes of Part 7 ITEPA; (iii) Whether the arrangements gave rise to a “restricted security” or “a restricted interest in securities” for the purposes of Part 7 Chapter 2 ITEPA; (iv) Whether s 447 ITEPA (charge on other chargeable benefits from securities) applied to the payment received by the employee; (v) Whether (a) the employee’s rights under the arrangements were, and/or (b) the payment received was, earnings of the employee, chargeable under s 62 ITEPA or Part 3 Chapter 10 ITEPA (taxable benefits: residual liability to charge).”
“363. The principle issue in these appeals is whether the arrangements in point fall within part 7 and whether the arrangements as rights under contracts for differences or contracts similar to contracts for differences pursuant to s 420(1)(g) or s 420(4). 364. We consider that the legislation indicates that a contract for differences (or similar) is a commercial concept by the reference in s 420(4)(b) to profit and loss and must be construed as requiring a commercial or business purpose. It is also clear from UBS that the contracts must be considered in the real world. We take the view that the scope of the provisions does not extend to commercially irrelevant features, the only purpose of which is to bring the arrangements within the legislation to obtain the tax benefit.”
“... is exposure to the underlying asset or metric and the profit or loss must be determined by reference to fluctuations in the asset.”
“… that in both cases the arrangements lacked the essential character of exposure to movement in the underlying metric and the contracts were inconsistent with the fundamental concept of a contract for differences. The underlying reference asset reaching the hurdle in each case was a condition precedent to payment, but the amount of payment was not dependent on the level the asset reached. We are satisfied that it was not the purpose of the parties to secure a profit or avoid a loss by reference to fluctuations in the value or price of an index or other factor designated in the contract. We conclude that on an unblinkered view of the facts, it cannot be said that the parties were, in any real commercial sense, speculating on fluctuations in circumstances where it was highly likely that the hurdles would be reached. The downsides had no commercial or business purpose and were included solely to achieve the tax benefit. The arrangements were, in our judgment, preordained in that there was no realistic possibility that the payments would not be made. Reaching the hurdle cannot be said to be an ‘upside win’ as the relevant provisions envisage. We hold that, viewed realistically, the arrangements cannot be characterised as contracts for differences or similar.”
“… [t]here was a distinction in Abbott v Philbin and UBS between the securities received at the outset, which had a value, and the payments subsequently received in the capacity of holders of the securities, the source of which was not employment. In these [the Jones Bros] appeals, the creation of the contracts formed part of the arrangements under which the rights were created to bring the scheme within the legislation. We consider the correct approach is to look at the substance of the contracts and not their form; the precise legal nature of the rights under the contracts does not alter the character of the payments made and received by the employees as earnings when viewed in the context of the totality of the arrangements.”
“…long-term bonus/profit participation (“Long Term Bonus”) in the amount of 3% of the amount by which the enterprise value (defined as being EBITDA times 10 (with this multiple of 10 to be fixed for the duration of this contract)) of Muller UK (as defined in clause 1) increases over successive periods of three financial years.”
“In my judgment, a direction under rule 18(4) should be made only in circumstances where the binding effect on a party would create an injustice that cannot be avoided by any other procedural means which preserves the integrity of the lead case process. On making a lead case direction the Tribunal must be satisfied that the cases give rise to common or related issues of fact and law. This case itself is a good example, in fact, of the care that should be taken before an appeal is designated as a related case under a rule 18 direction. A lead case direction is not one that is made lightly, nor should it routinely be capable of being cast aside.”
“Directions will be given for a hearing to determine the appropriate resolution of GHG’s case under rule 18(5), which will include the exchange of evidence relevant to the case put by GHG that its appeal should be allowed, on its own facts, notwithstanding the binding effect of the determination in Nuffield [the lead case] on the common or related issues of law as directed by the Tribunal under rule 18.”