Fluid System Technologies (Scotland) Limited & Anor, R (on the application of) v The Commissioners for HMRC [2025] UKUT 00278 (TCC)

[2025] UKUT 00278 (TCC)Case Numbers: UT/2024/000037 andUT/2024/000066
UPPER TRIBUNAL
(Tax and Chancery Chamber)
Venue Rolls Building, Fetter LaneHearing Heard on: 19–22 May 2025Date Judgment date: 15 August 2025
London, EC4A 1NL
JUDICIAL REVIEW – challenge to HMRC decisions made under the Disguised Remuneration Repayment Scheme – whether repayment eligibility conditions that HMRC had “no power to recover” or that the claimant had made “reasonable disclosure” of relevant loans met –quashing and mandatory orders refused
Before
MRS JUSTICE BACONJUDGE SWAMI RAGHAVANUT/2024/000037THE KING (ON THE APPLICATION OF)
Between
FLUID SYSTEM TECHNOLOGIES (SCOTLAND) LIMITEDClaimantLONDON FLUID SYSTEM TECHNOLOGIES LIMITEDClaimantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSDefendantUT/2024/000066ClaimantAnd betweenClaimantTHE KING (ON THE APPLICATION OF)ClaimantAIREDALE CHEMICAL COMPANY LIMITEDClaimantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSDefendantsFor Fluid System Technologies (Scotland) Ltd and London Fluid System Technologies Ltd:Giles Goodfellow KC and Ben Elliott, counsel, instructed by Levy & LevyFor Airedale Chemical Company Ltd:Rory Mullan KC, counsel, instructed by PricewaterhouseCoopers LLP for Defendants:Christopher Stone KC and Ishaani Shrivastava, counsel, instructed by the General Counsel and Solicitor to HM Revenue and CustomsDECISION

Introduction

[1]These claims are brought by way of judicial review of decisions issued by the defendants (HMRC) in 2021 and 2022, in which HMRC decided that the claimants had no entitlement under the Disguised Remuneration Repayment Scheme 2020 (DRRS) to refunds of amounts referable to income tax and Class 1 National Insurance Contributions (NICs) paid by them by way of settlements with HMRC, to avoid the impact of the Loan Charge legislation in Finance (No. 2) Act 2017. The DRRS was set up pursuant to ss. 20 and 21 of the Finance Act 2020 in response to an independent government-commissioned report by Sir Amyas Morse in 2019, which had found elements of the Loan Charge legislation to be unjustifiable.[2]The claims challenge the lawfulness of HMRC’s decisions on the basis of HMRC’s interpretation and application of certain eligibility conditions for repayment under the DRRS. Those conditions concern whether HMRC had “no power to recover” the relevant amounts of income tax and NICs at the time of the settlements, and whether “reasonable disclosure” of specified information had been made by the claimants in their tax returns. The claimants seek orders from the Tribunal quashing the disputed decisions and ordering HMRC to allow their repayment claims.[3]We refer to the claimants in case UT/2024/000037 as Fluid Scotland and Fluid London respectively (and together the Fluid claimants), and the claimant in case UT/2024/000066 as Airedale. The claims in both cases were filed in the High Court. Permission for judicial review was given by Foster J on 21 December 2023 (Fluid claimants) and by Sheldon J on 16 April 2024 (Airedale). In each case upon grant of permission the proceedings were transferred to this Tribunal. On 28 May 2024 Judge Raghavan directed that the claims should be heard together given the similarity of the issues raised.[4]The HMRC officers who made the review decisions under challenge (Louise Robinson in the case of the Fluid claimants and Samantha Fletcher in the case of Airedale) provided witness statements. These sought to explain how they had carried out their reviews and their understanding of the relevant statutory tests they had applied. The Fluid claimants had prior to the hearing been given limited permission to cross-examine Ms Robinson on the subject of the test she had applied in relation to the “reasonable disclosure” eligibility condition. HMRC also relied on a witness statement from Felix Bracher, an officer who had been involved in the operational aspects of the DRRS. On behalf of Fluid Scotland and Fluid London,witness statements were provided by their respective Managing Directors, Peter O’Connor and Adrian Wynne. The Fluid claimants also relied on witness statements from Mary Tierney, a Tax Director at Bennett Brooks chartered accountants. On behalf of Airedale a witness statement was provided by its Finance Director, Craig Thomson.[5]Submissions at the hearing were made by Mr Goodfellow KC and Mr Elliott for the Fluid claimants, Mr Mullan KC for Airedale, and Mr Stone KC for HMRC. Following the hearing we received further written submissions from all parties on two further questions sent by the Tribunal on 22 May 2025. The DRRS and related legislation Background to the DRRS

The DRRS and related legislation

[6]The origins of the Loan Charge and the subsequent repayment scheme in the form of the DRRS have been described in various previous judgments, including R (Clamp) v HMRC [2021] EWHC 2360 (Admin), [2022] 1 WLR 1067. The following is a brief summary.[7]Prior to 2011, there was widespread use of arrangements under which employees received part or most of their remuneration in the form of loans or quasi-loans provided by third parties. The typical arrangement was that the loans would be made by trustees of employee benefit trusts, often under arrangements devised by third-party tax avoidance scheme promoters,with the source of funds being the employer. In practice there would be no expectation of repayment, such that the loans were simply part of the employees’ remuneration. The intention of those arrangements was that the loans would escape liability for income tax and NICs.[8]In an attempt to address these arrangements, Part 7A Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) was enacted with effect from December 2010. That imposed income tax and Class 1 NIC charges on arrangements between an employer, employee and a third party to provide rewards in connection with the employment, where the third party provided a “relevant step” for the benefit of the employee, a relevant step being defined to include a loan to the employee.[9]That legislation did not, however, prevent the continued use of loan schemes by employers and employees. Schedule 11 of Finance (No. 2) Act 2017 therefore introduced what was referred to as the Loan Charge, which was designed to shut down the use of loan schemes. As originally enacted, the legislation provided that where a person had made a loan or quasi-loan on or after 6 April 1999, and an amount of the loan was outstanding on 5 April 2019, that person was treated as having taken a “relevant step” for the purposes of Part 7A ITEPA 2003.[10]Loans and quasi-loans were defined for these purposes in §2(1)–(3) of Schedule 11 as follows:
“(1) In this Part of this Schedule ‘loan’ includes – (a) any form of credit; (b) a payment that is purported to be made by way of a loan. (2) For the purposes of paragraph 1, P makes a ‘quasi-loan’ to a relevant person if (and when) P acquires a right (the ‘acquired debt’) – (a) which is a right to a payment or a transfer of assets, and (b) in respect of which the condition in sub-paragraph (3) is met. (3) The condition is met in relation to a right if there is a connection (direct or indirect) between the acquisition of the right and – (a) a payment made, by way of a loan or otherwise, to the relevant person, or (b) a transfer of assets to the relevant person.” (a) any form of credit; (b) a payment that is purported to be made by way of a loan. (a) which is a right to a payment or a transfer of assets, and (b) in respect of which the condition in sub-paragraph (3) is met. (a) a payment made, by way of a loan or otherwise, to the relevant person, or (b) a transfer of assets to the relevant person.”
[11]The consequence of the Loan Charge was that the outstanding amount of the loan or quasi-loan would be treated as employment income, and therefore subject to income tax and Class 1 NICs in the 2018/19 tax year. Importantly, that was the case not only if the loan or quasi-loan was made in a tax year for which HMRC had opened an investigation into the tax return of the relevant taxpayer, but also if it was made in a tax year for which no investigation had been opened. The effect of the Loan Charge was therefore to override the time limits within which HMRC was otherwise required to open investigations into tax returns, such that a taxpayer might find themselves taxed on a loan or quasi-loan made up to 20 years earlier, in respect of which HMRC had long since lost the ability to open an investigation to recover additional tax which might have been due.[12]To avoid the impact of the Loan Charge, many employees and employers (including the Fluid claimants and Airedale) settled disputes with HMRC regarding the tax treatment of past loan and quasi-loan transactions.[13]Meanwhile, in response to concerns about the scope of the Loan Charge, the government commissioned Sir Amyas Morse to carry out an independent review of the charge. His report Independent Loan Charge Review: report on the policy and its implementation (the Morse Report) was published in December 2019. It concluded that certain elements of the Loan Charge were not justifiable. In particular, the Morse Report concluded that:(1) The Loan Charge should not apply to loans entered into by individuals or employers before 9 December 2010, i.e. the date on which the draft Part 7A ITEPA 2003 was published and from which point it was considered by the report to be legally clear that a tax charge would arise on loan arrangements involving payment by a third party.(2) For loans made on or after 9 December 2010 during a tax year where HMRC had not opened an investigation (which the report referred to as an Unprotected Year), the Loan Charge should not apply to taxpayers who had made reasonable disclosure of their scheme usage. Other Unprotected Years should remain in scope of the Loan Charge, ensuring that taxpayers did not benefit from failing to disclose their tax affairs to HMRC. The definition of “reasonable disclosure” should reflect HMRC’s ordinary compliance approach in considering whether a self-assessment return was sufficiently clear about the usage of a loan scheme.(3) Unprotected Years arising from loan schemes entered into during the 2016/17, 2017/18, and 2018/19 tax years should however remain within the scope of the Loan Charge to ensure that taxpayers who entered into loan schemes after the Loan Charge was announced did not benefit from HMRC having ceased protecting years following the announcement of the Loan Charge.(4) HMRC should refund the Voluntary Restitution elements of settlement sums paid by taxpayers since 2016 to settle Unprotected Years, where the Loan Charge would no longer have applied to them due to the recommendations above.[14]The Morse Report provided the following definitions of Protected and Unprotected Years and Voluntary Restitution:
“Protected Year A year where HMRC has protected its position by opening an Enquiry within set time limits, has a valid Discovery Assessment in place or is still in time to do so. HMRC’s position is that amounts from these years would be collected through its compliance and litigation activity, without the Loan Charge. Unprotected Year A return period where HMRC has not opened a valid Enquiry within time limits and does not have a valid Discovery Assessment in place. Unless extended time limits apply HMRC would be out of time to collect amounts they consider due as a result of loan schemes, absent the Loan Charge. Taxpayers were required to pay Voluntary Restitution for these periods under the November 2017 settlement terms to ensure that they are not subject to the Loan Charge. Voluntary Restitution Paid, but not technically required, for Unprotected Years as part of the November 2017 settlement terms. Paying Voluntary Restitution for a year will prevent a future charge arising, specifically the Loan Charge. … Once agreed with HMRC in the form of a settlement contract, it becomes legally enforceable. Failure to pay Voluntary Restitution will result in the Loan Charge arising in respect of Unprotected Years.”
[15]The government accepted these recommendations in the Independent Loan Charge Review: Government response to the Review (December 2019). In particular, in relation to the recommendation for a refund of the Voluntary Restitution elements of settlements for Unprotected Years, the response stated at §§2.18–20 that:
“The Government accepts this recommendation and recognises that those who have already settled their tax liability have complied with their tax obligations under settlement terms designed on the basis of the Loan Charge applying to all years. These taxpayers should benefit from the decision not to apply the Loan Charge to unprotected years. Therefore, HMRC will repay Voluntary Restitution that has been paid by individuals and employers since the Loan Charge was announced in March 2016, for years that would be no longer subject to the Loan Charge because the year was unprotected. HMRC will set out guidance in due course for taxpayers on how HMRC will implement this recommendation.”
[16]That position was reflected in the Finance Act 2020 ss. 20–21, which required HMRC to establish a scheme for repayment of settlement sums as follows (emphasis added):
“20(1) The Commissioners for Her Majesty’s Revenue and Customs (‘the Commissioners’) must establish a scheme under which they may on an application made to them before 1 October 2021– (a) repay the whole or part of a qualifying amount paid or treated as paid to them under a qualifying agreement, or (b) waive the payment of the whole or part of a qualifying amount due to be paid to them under a qualifying agreement. (2) An agreement is a qualifying agreement if – (a) it is an agreement with the Commissioners, (b) it is made on or after 16 March 2016 and before 11 March 2020, and (c) it imposes an obligation on any party to the agreement to pay an amount of income tax that is referable (directly or indirectly) to a qualifying loan or quasi-loan. (3) An amount paid, treated as paid or due to be paid under a qualifying agreement is a qualifying amount if – (a) the amount is referable (directly or indirectly) to a qualifying loan or quasi-loan, and (b) the amount is one that an officer of Revenue and Customs had no power to recover at the time the agreement was made. (4) But an amount that is referable (directly or indirectly) to a qualifying loan or quasi-loan made on or after 9 December 2010 is not a qualifying amount by reason of subsection (3) unless at a time when an officer of Revenue and Customs had power to recover the amount a tax return, or two or more tax returns of the same type taken together, contained a reasonable disclosure of the loan or quasi-loan. (5) For the purposes of subsection (4), a tax return, or two or more tax returns taken together, contained a reasonable disclosure of the loan or quasi-loan if the return or returns taken together – (a) identified the qualifying loan or quasi-loan, (b) identified the person to whom the qualifying loan or quasi-loan was made, (c) identified any arrangements in pursuance of which, or in connection with which, the qualifying loan or quasi-loan was made, and (d) provided such other information as was sufficient for it to be apparent that a reasonable case could have been made that the amount concerned was payable to the Commissioners. (6) An amount paid, treated as paid or due to be paid under a qualifying agreement is also a qualifying amount if it is interest on another qualifying amount paid, treated as paid or due to be paid under that agreement. (7) A loan or quasi-loan is a qualifying loan or quasi-loan if it is made on or after 6 April 1999 and before 6 April 2016. (8) In this section – ‘loan’ and ‘quasi-loan’ have the meaning they have in Part 1 of Schedule 11 to [the Finance (No. 2) Act 2017] and Schedule 12 to that Act (see paragraph 2 of each of those Schedules), and ‘tax return’ means – (a) a return made under section 8 of TMA 1970 and any accompanying accounts, statements or documents, or (b) a return made under paragraph 3 of Schedule 18 to FA 1998, and a tax return is of the same type as another if both fall within the same paragraph of this definition. … 21(1) The scheme may make provision – (a) in relation to all qualifying agreements or specified descriptions of qualifying agreements only, and (b) in relation to all qualifying amounts or specified descriptions of qualifying amounts only. … (3) The scheme may make provision about the making of applications under the scheme, including— (a) provision as to who is or is not eligible to apply, (b) provision as to the conditions that must be met in order to apply, (c) provision as to the form, manner and content of an application, and (d) provision as to information or evidence to be provided in support of an application. (4) The scheme may make provision about the determination of applications under the scheme, including- (a) provision in accordance with which the Commissioners must determine whether to exercise their discretion to repay or waive the payment of a qualifying amount, and (b) provision in accordance with which the Commissioners must determine how much of any qualifying amount to repay or waive.” (a) repay the whole or part of a qualifying amount paid or treated as paid to them under a qualifying agreement, or (b) waive the payment of the whole or part of a qualifying amount due to be paid to them under a qualifying agreement. (a) it is an agreement with the Commissioners, (b) it is made on or after 16 March 2016 and before 11 March 2020, and (c) it imposes an obligation on any party to the agreement to pay an amount of income tax that is referable (directly or indirectly) to a qualifying loan or quasi-loan. (a) the amount is referable (directly or indirectly) to a qualifying loan or quasi-loan, and (b) the amount is one that an officer of Revenue and Customs had no power to recover at the time the agreement was made. (a) identified the qualifying loan or quasi-loan, (b) identified the person to whom the qualifying loan or quasi-loan was made, (c) identified any arrangements in pursuance of which, or in connection with which, the qualifying loan or quasi-loan was made, and (d) provided such other information as was sufficient for it to be apparent that a reasonable case could have been made that the amount concerned was payable to the Commissioners. ‘loan’ and ‘quasi-loan’ have the meaning they have in Part 1 of Schedule 11 to [the Finance (No. 2) Act 2017] and Schedule 12 to that Act (see paragraph 2 of each of those Schedules), and ‘tax return’ means – (a) a return made under section 8 of TMA 1970 and any accompanying accounts, statements or documents, or (b) a return made under paragraph 3 of Schedule 18 to FA 1998, and a tax return is of the same type as another if both fall within the same paragraph of this definition. (a) in relation to all qualifying agreements or specified descriptions of qualifying agreements only, and (b) in relation to all qualifying amounts or specified descriptions of qualifying amounts only. … (a) provision as to who is or is not eligible to apply, (b) provision as to the conditions that must be met in order to apply, (c) provision as to the form, manner and content of an application, and (d) provision as to information or evidence to be provided in support of an application. (a) provision in accordance with which the Commissioners must determine whether to exercise their discretion to repay or waive the payment of a qualifying amount, and (b) provision in accordance with which the Commissioners must determine how much of any qualifying amount to repay or waive.”
[17]It will be seen from these provisions that the distinction drawn in the Morse Report between Protected Years and Unprotected Years was implemented in the Finance Act 2020 by reference to the question of whether at the relevant time HMRC had a “power to recover” the tax that was the subject of the settlement: s. 20(3). “No power to recover” the tax was therefore a threshold condition for the tax amount to be treated as a qualifying amount that could be repaid. Consistent with that, as set out below, the “no power to recover” condition was one of the threshold conditions for recovery under the DRRS. The other main condition specified by s. 20 was the requirement for “reasonable disclosure” to be made of loans made on or after 9 December 2010: s. 20(4) and (5).

Relevant provisions of the DRRS

[18]HMRC implemented ss. 20–21 of the Finance Act 2020 by establishing the DRRS. DRRS §7.4 provides that an applicant that makes a valid application is eligible for repayment of any “Voluntary Restitution”, plus interest, paid to HMRC. “Voluntary Restitution” is defined in §3.1.27 as follows (emphasis added): “3.1.27 ‘Voluntary Restitution’ means the amount paid, treated as paid or due to be paid under a settlement agreement that, at the Commissioners’ discretion, and having regard to paragraphs 4.3 to 4.7, the Commissioners may decide is or is referable to:3.1.27.1 an amount of:3.1.27.1.1 income tax; or3.1.27.1.2 National Insurance contributions;3.1.27.2 referable (directly or indirectly) to a loan or quasi-loan made on or after 6 April 1999 and before 6 April 2016;3.1.27.3 that an officer of Revenue and Customs had no power to recover at the time the settlement agreement was made;3.1.27.4 that was treated for the purposes of the settlement agreement as an amount an officer of Revenue and Customs had no power to recover; and3.1.27.5 that, in a case where the loan or quasi-loan in paragraph 3.1.27.2 was made on or after 9 December 2010, at a time when an officer of Revenue and Customs had the power to recover the amount a tax return, or two or more tax returns of the same type taken together, contained a reasonable disclosure of the loan or quasi-loan.” 3.1.27.1.1 income tax; or 3.1.27.1.2 National Insurance contributions;[19]The conditions for repayment under the DRRS therefore differ according to whether the relevant loan was made before or after 9 December 2010, reflecting the recommendations of the Morse Report and the provisions of s. 20 of the Finance Act 2020:(1) For a loan made before 9 December 2010, the requirements for repayment are that the amount paid under the settlement agreement was an amount that HMRC had “no power to recover” at the time of the settlement agreement (§3.1.27.3), and treated as such in the settlement agreement (§3.1.27.4).(2) For a loan made on or after 9 December 2010, those two conditions must also be satisfied; but in addition it is necessary to show that there was “reasonable disclosure” of the loan in one or more tax returns of the same type (§3.1.27.5).[20]The requirement in §3.1.27.3 that the settled amount must be an amount that HMRC had “no power to recover” is the subject of a deeming provision in DRRS §4.5:
“4.5 For the purposes of paragraphs 3.1.27.3 and 4.6.1, and without limiting the circumstances in which an officer of Revenue and Customs will be treated as having had power to recover an amount at the time a settlement agreement was made, an officer of Revenue and Customs will be treated as having had power to recover an amount at the time a settlement agreement was made if at that time they had: 4.5.1 where the amount is an amount of income tax, issued a determination under regulation 80 of the Income Tax (Pay as You Earn) Regulations 2003 in respect of any year for which the amount may have been payable or had power to issue such a determination; and 4.5.2 where the amount is an amount of Class 1, Class 2 or Class 4 National Insurance contributions, taken action to protect or recover the amount or could have taken action to protect or recover the amount.”
[21]As regards the requirement in DRRS §3.1.27.5 for “reasonable disclosure” in relation to loans made on or after 9 December 2010, DRRS §4.7 provides that this is to be determined in accordance with s. 20(5) of the Finance Act 2020.[22]The interpretation and application of the “no power to recover” and “reasonable disclosure” requirements are the two overarching disputed points in relation to the claims in this case.

Recovery of income tax and NICs

[23]In order to understand the parties’ arguments on the “no power to recover” requirement in the DRRS, it will be necessary to understand the scope of HMRC’s powers to recover income tax and NICs, and the review/appeal processes in relation to those powers of recovery.[24]In relation to income tax, the position can be summarised as follows:(1) Where it appears to HMRC that an employer may have collected insufficient income tax through PAYE, HMRC may determine the amount of tax and serve a notice of that determination on the employer: Regulation 80(1) and(2) of the Income Tax (Pay as You Earn) Regulations 2003. In the remainder of this judgment, we will refer to this as a Regulation 80 determination. (2) A Regulation 80 determination may extend to the whole of the tax or to such part of it as is payable to a class or classes of employees specified in the determination, or one or more named employees specified in the determination: Regulation 80(4).(3) Pursuant to Regulation 80(5), a Regulation 80 determination is subject to certain parts of the Taxes Management Act 1970 (TMA 1970) as though it were an assessment to tax. Those include the provisions set out in (4)–(12) below.(4) An assessment to tax (other than a self-assessment) must normally be made within four years of the end of the tax year to which it relates: s. 34(1) TMA 1970. Tax payable by virtue of such assessment is normally due within 30 days of the date: s. 59B(6) TMA 1970.(5) S. 31(1)(d) TMA 1970 provides a right of appeal against any assessment to tax which is not a self-assessment. That appeal is initiated by sending written notice of the appeal to HMRC within the time specified in s. 31A.(6) Once a notice of appeal has been given to HMRC, HMRC may offer a review or the taxpayer may request a review (this is sometimes referred to as a “statutory review”). The taxpayer may also notify the appeal to the First-tier Tribunal (Tax Chamber) (FTT): s. 49A TMA 1970.(7) When a statutory review is requested by the taxpayer or offered by HMRC, HMRC must provide its “view of the matter in question”. “Matter in question” is defined in s. 49I as “the matter to which an appeal relates.” In the case of a review requested by the taxpayer, the “view of the matter” must be provided within a specified period from receipt of the request. In the case of a review offered by HMRC, the “view of the matter” must be provided along with the notification of the offer of review: ss. 49B and 49C TMA 1970.(8) If HMRC offers a statutory review of the assessment and the taxpayer accepts that offer, HMRC must then review the matter. If the taxpayer does not accept the offer of a review within the specified period, HMRC’s “view of the matter” is treated as if it were a written agreement for settlement of the matter under s. 54(1), and the taxpayer is not permitted to repudiate or resile from that agreement, unless it notifies an appeal to the FTT: s. 49C(3)–(6) TMA 1970.(9) If HMRC reviews the matter pursuant to ss. 49B or 49C, the review may conclude that HMRC’s “view of the matter” is to be upheld, varied or cancelled: s. 49E TMA 1970. HMRC’s conclusions are then (again) treated as if they were a written agreement for settlement of the matter under s. 54(1), and the taxpayer is not permitted to repudiate or resile from that agreement, unless it notifies an appeal to the FTT: s. 49F TMA 1970.(10) If the taxpayer notifies an appeal to the FTT (whether before or after a statutory review by HMRC), the FTT has the power to increase, decrease or uphold the assessment: s. 50 TMA 1970.(11) If a settlement to uphold, vary, cancel or discharge the assessment is agreed following notice of an appeal to the FTT, but before the appeal is determined, it is treated as if the FTT had determined the appeal in the way provided for in the settlement agreement: s. 54(1) TMA 1970.(12) Once an appeal has been made by the taxpayer (whether to HMRC alone or notified to the FTT) the taxpayer cannot unilaterally withdraw that appeal; rather, pursuant to s. 54(4) TMA 1970, HMRC can indicate that it is unwilling for the appeal to be withdrawn. If the appeal has been notified to the FTT, and HMRC objects to the appeal being withdrawn on the basis of a case seeking an increase in the amount stated in the original assessment, the FTT is required to determine the matter and may (under s. 50(7) TMA 1970) increase the assessment if it finds that the taxpayer was undercharged in the original assessment: HMRC v CM Utilities [2017] UKUT 305 (TCC).[25]NICs are statutory liabilities rather than tax charges, and the procedure for their recovery is therefore different. Again in summary, so far as relevant for these proceedings:(1) S. 8(1)(c) of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (TOFA 1999) provides that HMRC may decide whether a person is liable to pay NICs contributions, and if so in what amount. We will refer to this as a s. 8 decision.(2) A s. 8 decision may be the subject of an appeal to the FTT: s. 11 TOFA 1999.(3) HMRC may vary a s. 8 decision at any time before the FTT determines an appeal, if it has reason to believe that the decision was incorrect at the time it was made. Where the varied decision supersedes the earlier decision, it takes effect from the date of the change in circumstances which rendered the earlier decision inappropriate: Regulations 5 and 6 of the Social Security Contributions (Decisions and Appeals) Regulations 1999.(4) While there is no time limit to make or vary a s. 8 decision, a claim by HMRC to recover unpaid NICs is subject to the six-year limitation period provided in s. 9 of the Limitation Act 1980 and (of relevance to Fluid Scotland) the 20-year limitation period in Scotland under the Prescription and Limitation (Scotland) Act 1973. The claim is typically issued in the county court, and pending any appeal against the s. 8 decision proceedings are then adjourned. Such claims are sometimes referred to as protective writs.(5) If HMRC wishes to amend a county court claim so as to recover an increased amount of NICs, it will need to make an application to amend under CPR r. 17.4(2). It is then a matter of discretion whether the court grants the application. HMRC’s decisions under review Overview of judicial review claims

HMRC’s decisions under review

[26]During the course of the tax years 2008/09 to 2013/14, the claimants entered into loan or quasi-loan transactions, which we will generally refer to in this judgment simply as “loans”. Those arrangements were disclosable to HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) regime. In broad terms, each loan arrangement involved a series of agreements under which certain employees of the claimants incurred a debt to either an Employee Benefit Trust (EBT) (sometimes referred to by the relevant scheme promoter as a Business Benefit Trust or BBT), or an Employer-Financed Retirement Benefit Scheme (EFRBS), and received payments of an equivalent amount from the relevant claimant. The economic effect of these transactions, in circumstances where there would usually be little practical likelihood of repayment being required, was that the employee ended up with significant sums of money. The intention of the schemes was to escape the relevant tax and NICs charges on remuneration, while avoiding triggering the “disguised remuneration” anti-avoidance provisions in Part 7A ITEPA 2003 which had been designed to combat loan schemes of this type.[27]In respect of some but not all of the relevant years, HMRC issued Regulation 80 determinations within the relevant limitation periods, and s. 8 decisions. The Regulation 80 determinations were appealed to HMRC, but no reviews pursuant to ss. 49B or 49C TMA 1970 were either requested by the claimants or offered by HMRC; nor were the appeals notified to the FTT. Where s. 8 decisions were issued, HMRC generally, but not always, commenced court proceedings in the county court to recover the NICs stated in those decisions.[28]Following the enactment of the Loan Charge in 2017, the claimants entered into settlement agreements with HMRC to prevent the Loan Charge applying to the loans outstanding under the various arrangements. The settlement agreements were made on 26 March 2018 (Fluid Scotland), 13 March 2018 (London Fluid) and 5 April 2019 (Airedale), and covered both PAYE and NICs. HMRC treated part of the income tax amounts paid under each settlement as “voluntary restitution”, on the basis that the relevant Regulation 80 determinations issued by HMRC had understated the income tax due, or were determinations in relation to different transactions, and it was by the time of the settlement too late to issue new Regulation 80 determinations. Likewise, NICs amounts paid under the settlements were also treated as “voluntary restitution” where they were considered not to be protected by a s. 8 decision and corresponding county court claim.[29]The consequence was that the settlements of those voluntary restitution amounts did not give rise to the statutory interest which would otherwise have been payable on late payments of PAYE and NICs. The settlement sums and the amounts treated as voluntary restitution for the three claimants were as follows: Settlement sum Voluntary restitution Fluid Scotland £1,402,325.21 £548,457.21 Fluid London £4,035,505.30 £1,708,319.12 Airedale £5,247,204.32 £362,062.60[30]Following the establishment of the DRRS, each claimant made a claim for repayment of the amounts of PAYE and NICs that had been treated as voluntary restitution in the settlements with HMRC. Some claims were accepted on the basis that HMRC agreed that it had no power to recover the relevant amounts, either because no Regulation 80 determination or s. 8 decision and county court claim had been made, or because the Regulation 80 determination that was made did not extend to the relevant employees whose loans were the subject of the settlements, the relevant limitation periods for additional Regulation 80 determinations or county court proceedings (as relevant) having expired. The judicial review proceedings before us concern repayment claims that were, by contrast, refused. Those refusals were upheld on review by HMRC in decisions dated 10 December 2021 (Fluid Scotland), 17 December 2021 (Fluid London) and 22 June 2022 (Airedale).[31]The disputed repayments for all three of the claimants concern situations where HMRC had issued a Regulation 80 determination, but subsequently considered a higher amount of tax to be due, that higher amount then being the subject of a settlement. In the case of Fluid London, there is also a claim in respect of NICs included in the settlement agreement, following a s. 8 decision and county court claim which did not cover the additional NICs due on a particular loan transaction. Again, in both cases the relevant limitation periods had expired, precluding HMRC from issuing new Regulation 80 determinations or new county court claims.[32]Mr Stone’s oral submissions explained that in such cases the need to increase or “uplift” the amount specified in the original determination or decision arose in two broad situations. The first was where HMRC’s calculation had assumed that the employee was a basic rate taxpayer, but HMRC then sought to increase that calculation in light of information later received that the employee was in fact a higher rate taxpayer. The second situation was where a Regulation 80 determination amount referred to one use of a loan scheme, but HMRC then sought to capture income tax (and sometimes NICs) in relation to additional amounts paid into the same scheme. All of the claimants pursue repayment claims for the shortfall between the amounts originally specified by HMRC in the Regulation 80 determination (and in Fluid London’s case s. 8 decision) and the uplifted amounts paid under the settlement agreements.[33]In respect of Fluid Scotland and Airedale, repayments are also sought in respect of amounts relating to years where HMRC accepts that it had no “power to recover”, but contends that the claimants did not meet the additional requirement of “reasonable disclosure”.[34]The next sections summarise the reasoning provided in HMRC’s review decision letters that are the subject of the judicial review claims brought by the three claimants, focusing on the relevant tax years and specific income tax/NICs sums that remain in dispute in this claim. (We therefore omit findings that relate to sums that are no longer disputed by the claimants.) Where relevant we distinguish the particular schemes used by their DOTAS numbers.

Fluid Scotland

[35]For Fluid Scotland, the disputed tax years are 2008/09 to 2011/12, and the review decision letter was written by Ms Robinson. The letter noted that the claimant had made contributions to BBTs and subsequently EFRBS for the benefit of certain employees, and that HMRC had issued various Regulation 80 determinations and s. 8 decisions. The letter then set out details of the settlement agreement, Fluid Scotland’s claim for repayment under the DRRS, and HMRC’s refusal decision dated 17 June 2021.[36]In her review of that refusal decision Ms Robinson referred to the recommendations of the Morse Report and the subsequent requirement of s. 20(3)(b) of the Finance Act 2020 limiting the scheme to repayments of amounts which HMRC had “no power to recover”, summarising her understanding of that as follows: “So voluntary restitution is essentially any voluntary payments that taxpayers had agreed to make in respect of an unprotected year as part of settlements concluded before changes to the scope of the loan charge. It is fully defined at paragraph 3.1.27 of the scheme”.[37]She went on to explain that:
“For paragraphs 3.1.27.3 and 3.1.27.4, I need to consider if HMRC had taken a step to recover the tax on the loan or quasi loan in the period in which it was made. For the loans made on or after 9 December 2010, if no step has been taken, I then need to consider reasonable disclosure, 3.1.27.5.”
[38]For each of the tax years in question, Ms Robinson accepted that the shortfalls had been treated under the settlement agreements as amounts that HMRC had no power to recover, such that they met the condition in DRRS §3.1.27.4, the exception being the contribution in relation to EFRBS scheme 65012004 (scheme650) in 2012/13 for which HMRC considered there to be no shortfall.[39]For the years 2008/09, 2009/10, 2010/11 and a contribution under EFRBS scheme 650 in 2011/12, however, Ms Robinson said that the original Regulation 80 determinations and/or s. 8 decisions were capable of being uplifted, such that the condition of “no power to recover” in DRRS §3.1.27.3 was not in fact met. The explanation given was that:
“Although the decisions in place at the time of settlement did not equate to total settlement amount included in the agreement, they were under appeal and capable of being uplifted prior to settlement, either by agreement or varied in review. If the decision(s) contains the correct class of employees, and the correct tax periods, HMRC has recent case law in its favour in that respect in the case of The Commissioners for HM Revenue and Customs v C M Utilities-Limited 2017 UKUT 0305.”
[40]For the contribution under a different EFRBS scheme 54902593 (scheme 549) in 2011/12, HMRC had made no Regulation 80 determination and it therefore accepted that it had no power to recover the income tax shortfall. It concluded, however, that the reasonable disclosure condition under §3.1.27.5 was not met. Ms Robinson noted that Fluid Scotland had disclosed the use of a tax avoidance scheme for that year in the notes to its corporation tax computation for the calendar year 2011. She said, however, that:
“There is no mention of how the arrangement worked, the amounts loaned, the recipients of the loans or a clear indication that an earnings charge should have been applied. The Disclosure hasn’t therefore been met.”
[41]She further noted that the self-assessment tax return for the director in question did not disclose the use of a tax avoidance scheme. Ms Robinson therefore concluded that she had seen nothing that constituted reasonable disclosure of the scheme used by Fluid Scotland.[42]Ms Robinson’s letter also responded to specific representations made by Fluid Scotland, including the argument that HMRC lacked the power to recover any insufficiency of income tax by asking the FTT to increase the assessment, since that power only lay with the taxpayer. Ms Robinson replied:
“I have, covered above, where the insufficiency in the amounts assessed, meets the criteria at subsection 3.1.27.4, but those years fail under 3.1.27.3, as HMRC had decisions in place that were under appeal etc. Thus, protecting the duty.”

Fluid London

[43]For Fluid London, the disputed tax years are 2008/09 to 2012/13, and the review decision letter was also written by Ms Robinson. As with Fluid Scotland, the letter noted that the claimant had made contributions to BBTs and subsequently EFRBS for the benefit of certain employees, and that HMRC had issued various Regulation 80 determinations and s. 8 decisions. The letter set out details of the two settlement agreements entered into between HMRC and Fluid London, Fluid London’s claim for repayment under the DRRS, and HMRC’s refusal decision dated 17 June 2021.[44]In her review of that refusal decision Ms Robinson followed the same format as her review decision for Fluid Scotland. For each of the tax years in question, she accepted that the shortfalls had been treated under the settlement agreements as amounts that HMRC had no power to recover, such that they met the condition in DRRS §3.1.27.4.[45]For the years 2008/09 to 2011/12 and the income tax referable to a contribution under EFRBS scheme 650 in the year 2012/13, Ms Robinson said that the original Regulation 80 determinations and/or s. 8 decisions were capable of being uplifted, such that the condition of “no power to recover” in DRRS §3.1.27.3 was not met, on the basis of the same reasoning as set out for Fluid Scotland.[46]As with Fluid Scotland, Ms Robinson’s letter responded to specific representations made by Fluid London that (among other things) HMRC lacked the power to recover any insufficiency of income tax by asking the FTT to increase the assessment. Ms Robinson replied:
“HMRC, were at the time of the settlement in a position to make an application to tribunal to have the value of the assessments uplifted, supported by a recent tribunal case. Thus, protecting the duty.”

Airedale

[47]For Airedale, the disputed tax years are 2008/09, 2009/10, 2011/12, 2012/13 and 2013/14, and the review decision letter was written by Ms Fletcher. The letter followed a similar format to that of Ms Robinson’s review decisions for the Fluid claimants. The letter noted that the claimant had made contributions to BBTs and subsequently the Airedale EFRBS, and that HMRC had issued various Regulation 80 determinations and s. 8 decisions. As with the review decisions for the Fluid claimants, the letter then set out details of the settlement agreement, Airedale’s claim for repayment under the DRRS, and HMRC’s decision on 17 February 2022 finding that Airedale was eligible for only a partial repayment of the sums paid under the settlement agreement.[48]For the year 2008/09, HMRC had issued a Regulation 80 determination in respect of four named individuals. Ms Fletcher considered that this was capable of being uplifted to the higher amount of PAYE specified for those four individuals in the settlement agreement. She accepted, however, that Airedale was entitled to a repayment in respect of the PAYE for two individuals included in the settlement agreement who were not named on the Regulation 80 determination. She also accepted that the full amount of the NICs included in the settlement agreement was repayable, on the basis that HMRC had not issued a protective writ and was out of time to do so at the point of settlement.[49]For 2011/12, it was noted that a Regulation 80 determination had been issued in an amount exceeding the relevant settlement sum. Ms Fletcher therefore considered that the §3.1.27.3 condition was not met for that year. In respect of NICs, however, although a s. 8 decision had been adopted for a sum exceeding the NICs element of the settlement, a protective writ had not been issued, so Ms Fletcher went on to consider whether there had been reasonable disclosure in respect of that element in the settlement.[50]For 2012/13 and 2013/14, Ms Fletcher accepted that HMRC had made no Regulation 80 determinations or s. 8 decisions. It was therefore necessary to consider reasonable disclosure for those years also.[51]Ms Fletcher concluded that the reasonable disclosure condition under DRRS §3.1.27.5 was not met for any of the relevant years. She noted that Airedale had disclosed the use of an EFRBS in the notes to its corporation tax computations for the relevant years. She said, however, that:
“The notes do not give the names of the persons to who the loans were made to or give information that would make it apparent that a reasonable case could be made that the amounts concerned were payable to the commissioners. The note specifically refers to ‘for the benefit of employees and persons connected with them’ but does not give the names of those individuals as required in the legislation at section 20 Finance Act 2020.”
[52]As regards the relevant self-assessment tax returns, those referred to transactions entered into with the Airedale EFRBS. Ms Fletcher said, in that regard:
“Having examined the information submitted, I am of the view that by looking at the Self Assessment returns in this case, the loan cannot be established and to whom it has been made, the relevant arrangements and whether income tax was due on the loan … subsequently, this does not constitute reasonable disclosure. Based on the information provided I do not consider that HMRC were told enough to know that the individuals received loans for the full amount and that it was chargeable as earnings.”
[53]In response to representations made by Airedale that (among other things) HMRC’s interpretation of the “power to recover” test was incompatible with the statutory definition in s. 20(3) of the Finance Act 2020, Ms Fletcher made essentially the same point as Ms Robinson had done in her Fluid London review decision cited at §46 above.

Issues

[54]The two overarching legal issues raised by the claims are:(1) The interpretation of the “no power to recover” condition in DRRS §3.1.27.3, either on its own or when read together with the deeming provisions in §4.5. This issue arises in relation to all of the claims of Fluid London, most of the claims by Fluid Scotland, and one claim (for the tax year 2008/09) by Airedale.(2) The interpretation of the “reasonable disclosure” condition in DRRS §3.1.27.5, for loans entered into on or after 9 December 2010 where HMRC did not have a power to recover under DRRS §3.1.27.3. This is relevant to part of the claim by Fluid Scotland for the tax year 2011/12, and all the claims of Airedale for the tax years 2011/12 onwards.[55]Once these legal issues have been determined, it will be necessary to consider their application to the decisions taken by HMRC for each of the claimants in relation to each of the disputed years. Where it is established that HMRC did have a power to recover the relevant amount, that is a complete answer to the repayment claim; and where HMRC reached that conclusion it did not go any further. Where, however, it is concluded that HMRC did not have a power to recover, if the amount concerns a loan made on or after 9 December 2010, it is then necessary to consider whether reasonable disclosure was made. HMRC accordingly did (as set out above in relation to Fluid Scotland and Airedale) consider the reasonable disclosure issue for years in respect of which it had accepted that it did not have the power to recover all or part of the voluntary restitution amounts in the settlement agreements.[56]In relation to the claims by the Fluid claimants that were decided by HMRC on the basis of the no power to recover condition, for the tax years involving loans made on or after 9 December 2010, if we were to find (contrary to HMRC’s decision on those claims) that HMRC did not have power to recover those amounts of tax, the question would arise as to how to address the reasonable disclosure point. It was (by the time of the hearing) common ground that in that situation the decision should be remitted back to HMRC to make a decision on the reasonable disclosure issue. In the event, we do not need to do so in light of our decision set out below. Power to recover The parties’ submissions

Power to recover

[57]The arguments were different for the income tax and NICs claims. For income tax, as set out above, the sums at issue in these proceedings were treated as voluntary restitution for the purposes of the settlement agreements, on the basis that those sums were not covered by Regulation 80 determinations. For settlement purposes, therefore, those sums were treated as amounts that HMRC had no power to recover (with the consequence noted at §29 above that statutory interest was not payable on those sums). HMRC nevertheless takes the view that the effect of the deeming provision in DRRS §4.5.1 is that HMRC should be regarded as having had a power to recover those sums, since it issued Regulation 80 determinations for years in which those sums may have been payable, albeit that those determinations did not specifically cover the sums in question.[58]Mr Stone submitted that this follows from the wording of §4.5.1 which refers only to HMRC having issued a Regulation 80 determination in respect of any year for which the amount may have been payable. He pointed out that there is no express requirement in that paragraph for the Regulation 80 determination to have been for the amount in question. He therefore said that it was sufficient if there was a determination in place, even if that was for a different and far lower amount than subsequently claimed by HMRC in the relevant settlement agreement (and indeed calculated by reference to a different transaction to the transaction subsequently relied upon by HMRC). While he accepted that this would deem HMRC to have had a power to recover sums which it could not in fact have recovered (particularly if HMRC had “issued a determination” under Regulation 80 for a lower amount, which was not then appealed), he submitted that this was simply the consequence of the adoption in §4.5.1 of a “bright line” test.[59]In the alternative, Mr Stone submitted that he could get to the same result on the facts of the decisions in this case without needing to rely on the deeming provision, since HMRC does in fact have a “power to recover” under the TMA 1970 framework set out at §24 above where a Regulation 80 determination has been appealed. In such a case, he said, HMRC has the power to seek to recover sums greater than set out in the Regulation 80 determination, either by providing a “view of the matter” letter setting out a greater amount than in the original Regulation 80 determination, or by increasing the amount in the statutory review process, or by seeking to recover increased amounts on appeal to the FTT.[60]In respect of all of the present claims, the Regulation 80 determinations had been appealed but the appeals had then not progressed further, such that there had not been either a review of the determinations by HMRC or a notification of an appeal to the FTT. Accordingly, Mr Stone contended, at the date of the settlement agreements it remained open to HMRC to offer a review and thereafter to increase the amounts claimed under the Regulation 80 determinations. Mr Stone therefore submitted that even without reference to the §4.5.1 deeming provision HMRC had a “power to recover” the amounts treated as voluntary restitution under the settlement agreements, for the purposes of DRRS §3.1.27.3.[61]Mr Goodfellow and Mr Mullan submitted that §4.5.1 could not sensibly be interpreted in the way suggested by HMRC, since that would create a situation where, contrary to the clear intention of the Morse report and ss. 20–21 of the Finance Act 2020, HMRC could refuse repayment on the basis of a deemed power to recover, in a situation where in fact it did not have such a power under the TMA 1970 provisions. Their submission was that §4.5.1 should instead be interpreted as treating HMRC as having had a power to recover where HMRC either(i) had issued a Regulation 80 determination for the amount in question, for a year in which that amount may arguably have been payable, or(ii) was still in time to issue such a determination, if it had not done so.[62]As to HMRC’s alternative argument that it had a power to recover in this case under the appeal/review framework in the TMA 1970, Mr Goodfellow and Mr Mullan advanced various different arguments contending that HMRC did not have the power to uplift the existing Regulation 80 determinations. In particular, they said that HMRC does not have the power under s. 49C TMA 1970 to increase an assessment when stating its “view of the matter”. Nor (they said) does HMRC have a unilateral power to uplift following a statutory review or appeal to the FTT, those processes depending instead on the taxpayer taking action (such as requesting a review and then not objecting to an uplift) or the FTT deciding to uplift (where an appeal to the FTT is notified). On the facts here, however, there was no statutory review or appeal to the FTT that had been commenced as at the time of the settlement. Mr Mullan also advanced an argument about the scope of an appeal to the FTT, if the taxpayer chose to notify such an appeal. Finally, the claimants contested the extension of existing Regulation 80 determinations to further contributions not originally addressed in those determinations.[63]The NICs uplift issue was only in dispute for Fluid London, for one year (2009/10). Airedale did not dispute the power to recover in relation to NICs; and in relation to Fluid Scotland the longer limitation period meant that HMRC was for all of the relevant tax years still in time to issue county court proceedings, such that it was common ground that it had a power to recover NICs at the time of the settlement agreement.[64]In relation to Fluid London, the NICs sum for 2009/10 was treated in the settlement agreement as voluntary restitution, on the basis that it was not covered by the s. 8 decisions that had been issued. Mr Stone’s submission (reflecting the wording of DRRS §4.5.2) was that HMRC could have taken action to protect or recover the full NICs liability, and thus could have established a “power to recover” where a s. 8 decision specified a lesser sum than the amount subsequently agreed in a settlement. This was on the basis that the s. 8 decisions could have been varied to cover higher amounts, and HMRC could then have applied to amend its county court claim to cover the higher amount of NICs in issue.[65]Mr Elliott disputed that analysis, arguing that HMRC did not itself have any power to uplift its claim for NICs, since that was a matter for the discretion of the county court on an application to amend; and he said that any such application would likely have failed because the amendment would have related to different facts to those that were the subject of the original claim.[66]We will address these arguments by considering first the arguments on the interpretation of the DRRS §4.5.1 deeming provision, and HMRC’s alternative argument on the power to uplift the Regulation 80 determination amounts in any event. We will then consider the power to recover NICs. Having addressed the legal arguments, we will consider their application to the specific claims in these proceedings.

The interpretation of DRRS §4.5.1

[67]It was common ground between the parties that, as delegated legislation, DRRS §4.5.1 must be interpreted in light of the enabling Act. This reflects the general principle that subordinate legislation should be construed consistently with the purpose and scope of the primary legislation under which it is made.[68]We also did not understand it to be in dispute that §4.5.1 does indeed function as a deeming provision, as we have described it. In principle, therefore, the provision treats circumstances that would or might not otherwise satisfy the “power to recover” condition as if they did. The scope of the provision in the light of the enabling legislation was however a matter of contention.[69]The claimants’ overarching submission was that HMRC’s interpretation of §4.5.1 would impermissibly narrow the “no power to recover” condition. It was submitted that this would allow HMRC to deny repayment in circumstances where it quite obviously had no actual right to recover the relevant amount of tax, thereby frustrating the purpose of the Finance Act 2020.[70]The interaction between delegated rules and primary legislation was considered in R (Sibley) v HMRC [2021] EWHC 3195 (Admin), [2022] STC 336. In that case, a similar argument was raised concerning the scope of HMRC’s powers under delegated legislation. The powers conferred on HMRC by ss. 20–21 of the Finance Act 2020 were discussed by Chamberlain J in his judgment dismissing the taxpayer’s application for permission to apply for judicial review.[71]Mr Mullan objected that a permission decision could not be cited as authority, referring to the Supreme Court Practice Direction on the Citation of Authorities [2001] 1 WLR 1001. That objection is misconceived. The Practice Direction on the Citation of Authorities does not exclude from citation all types of permission decision. Rather, it sets out (in §§6.1 and 6.2) the following specific categories of judgment which may not be cited unless the judgment clearly indicates that it purports to establish a new principle or to extend the present law:
“Applications attended by one party only Applications for permission to appeal Decisions on applications that only decide that the application is arguable County court cases, unless (a) cited in order to illustrate the conventional measure of damages in a personal injury case; or (b) cited in a county court in order to demonstrate current authority at that level on an issue in respect of which no decision at a higher level of authority is available.”
Applications for permission to appeal

Decisions on applications that only decide that the application is arguable

[72]The Sibley judgment does not fall into any of those categories. It is a decision on an application for permission to apply for judicial review, where the judge concluded that the grounds advanced by the claimant were not reasonably arguable (and refused permission to rely on a further new ground at the hearing). The judgment may therefore properly be relied upon by HMRC. It is clearly relevant to the issues in this case, not least because the claimants’ arguments in the present case bear some similarity to the arguments sought to be advanced in Sibley.[73]In particular, in Sibley the claimant argued that the DRRS exclusion from repayment of amounts which related to loans which had been repaid by the time of the settlement agreement (not in issue in the present case) frustrated the purpose for which HMRC’s powers to adopt the DRRS were granted, referring in particular to the Morse Report. Chamberlain J rejected that argument, on the grounds that ss. 20–21 of the Finance Act 2020 require HMRC to establish a scheme under which it “may” (not “must”) repay the whole or part of a qualifying amount paid or treated as being paid under a qualifying agreement. He accepted HMRC’s submission that this did not require HMRC to repay every sum which fulfilled the statutory definition of a qualifying amount (§17). He went on to say, at §19:
“In my judgment, the terms of s. 21 are flatly inconsistent with the claimant’s submission that the scope of HMRC’s scheme-making power is limited to dealing with administrative matters such as the form of the application. On the contrary, it is plain from [the] language used that Parliament intended HMRC to have a much broader discretion, both as to the substantive conditions under which repayment would be made and as to the procedural and formal requirements for applications under the Scheme. That discretion must, of course, be exercised according to the usual public law principles. Subject to that, however, Parliament provided that it was HMRC which was to decide which qualifying amounts would be repaid and under what conditions.”
[74]As Chamberlain J explained further at §24, the requirement (disputed by the claimant in that case) that the loan be outstanding introduced a “bright line eligibility condition” which avoided the need for potentially difficult assessments as to the subjective reasons why the settlement was agreed. That was within HMRC’s powers under ss. 20–21, since (§26):
“… Parliament has, in express terms, conferred a power to legislate for, among other things, the conditions for repayment under the Scheme. In doing so, it has signalled with clarity that the legislator (here HMRC) may cut down the range of cases in which repayment is due. In my judgment, the contrary is not reasonably arguable.”
[75]At §§27–31 Chamberlain J went on to reject the further argument that HMRC had acted irrationally by setting a bright line requirement that the loan should be outstanding at the time of the settlement agreement. In his view, even if a bright line rule led to “some distinctions capable of being regarded as anomalies”, it was for HMRC, exercising the discretion conferred on it, to “balance the need to eliminate such anomalies against the virtues of simplicity and administrative workability”.[76]Applying the same interpretative approach as in Sibley, it is common ground that it was within HMRC’s powers under ss. 20–21 of the Finance Act 2020 to adopt a deeming provision in the interests of certainty. Such a provision could specify circumstances in which HMRC would be regarded as having a power to recover. Thus, although Mr Goodfellow’s submissions criticised HMRC’s interpretation on the basis that it narrowed the circumstances in which repayment could be made, we agree with HMRC that it was possible (as was the case in Sibley)for conditions in a deeming provision to be drafted more broadly than the underlying statutory power.[77]However, that does not mean that HMRC’s interpretation of §4.5.1 is correct. HMRC advances its interpretation as one which is consistent with the literal reading of the wording. It is true that on a literal reading the provision deems there to be a “power to recover” as long as a Regulation 80 determination is issued for the year for which the amount may have been payable. But the difficulty is that, when read literally, it also extends beyond limits which even HMRC accepts are there. HMRC accepts, for example, that if the Regulation 80 determination identified specific individuals, the deeming provision in §4.5.1 would not allow it to recover amounts of tax which related to other individuals not specified in the determination. That supports the view that the provision cannot be read entirely literally but must, in line with established principles of construction, be read with the legislative purpose in mind.[78]HMRC’s interpretation of §4.5.1 would be flatly contrary to the purpose of the DRRS. It would mean, for example, that if HMRC had issued a determination for a small amount, a fraction of the voluntary restitution sum, and the taxpayer had not appealed, such that (as Mr Stone accepted) HMRC would have had no power whatsoever to uplift the determination and claim any larger amount, HMRC would nevertheless be able to retain the disputed amount.[79]There is nothing in the legislative scheme of the Finance Act 2020to suggest that such an anomaly was intended. Nor is there any coherent reason why that should have been intended as a matter of simplicity or workability. The question of what Regulation 80 determinations have been made at a given point and for what amounts should be capable of being readily established.[80]The more obviously coherent interpretation is that the determination must be for the amount in question. That is consistent with the fact that the entire provision in §4.5 focuses on the power to recover “the amount”, and §4.5.1 itself also repeatedly refers to “the amount”. In the context of those references, it is difficult to see how the “determination” referred to in §4.5.1 can sensibly mean anything other than a determination in relation to “the amount”.[81]That interpretation is further supported by §4.5.2, which deems HMRC as having had power to recover an amount of NICs where it did take action or could have taken action to protect or recover “the amount”. If the intention was to draw a bright line for income tax, deeming an amount to be recoverable provided that a determination for any amount had been issued (or could still be issued), it is unclear why the line would be drawn differently for NICs.[82]It is, however, necessary to consider what is meant by the requirement in §4.5.1 that the determination in question must have been made “in respect of any year for which the amount may have been payable”. Recalling that the provision is a deeming provision, the question also arises as to what function §4.5.1 serves if it is not the one that HMRC advances and which we have rejected.[83]We consider that the purpose of those words, and therefore also one function of the deeming provision, is to cater for the situation where the arrangements implemented by the taxpayer might involve a number of transactions spanning different tax years, creating uncertainty as to the year in which the liability would have arisen. DRRS §4.5.1 thus enables HMRC to forestall an argument that HMRC had protected the wrong year in such circumstances, since it is sufficient that a Regulation 80 determination had been made for “any year for which the amount may have been payable”. Mr Stone’s oral submissions acknowledge this role for §4.5.1.[84]A further consequence of §4.5.1 is that, provided that a determination has been issued (in respect of such a year, and on our interpretation for the relevant amount), it is not necessary to go further and consider the effect of any potential appeal proceedings under the mechanisms set out at §24 above. The deeming provision therefore avoids a debate about whether HMRC would, under those mechanisms, have a power to recover the relevant amount in light of the stage which any appeal had reached and the outcome of the appeal process. §4.5.1 is in both senses a bright line rule of the sort envisaged in Sibley, to ensure the administrative workability of the scheme.[85]For all the reasons above, we reject HMRC’s interpretation of the deeming provision in §4.5.1. In our judgment, while that provision does set out a bright line rule in the respects we have just described, the reference to “a determination” must be interpreted as meaning a determination for the amount in question, namely the amount for which HMRC claims a power to recover at the time of the settlement agreement. We therefore do not consider that HMRC can claim that it had “issued a determination” for the purposes of §4.5.1 where that determination was for an amount lower than the amount subsequently paid under the relevant settlement agreement. Accordingly, it is necessary to consider HMRC’s alternative argument that it was entitled to refuse repayment without reliance on §4.5.1, because on the facts of the claimants’ cases HMRC did indeed have “power to recover” the disputed amounts of income tax.

HMRC’s alternative argument on the power to uplift income tax

[86]We note at the outset that the phrase “power to recover” is not a defined term under the Finance Act 2020. However, it is clear that Parliament used that phrase against the backdrop of established procedural machinery set out in the TMA 1970, which informs the interpretation of the concept of “power to recover”, and which we have summarised at §24 above. In broad outline, those provisions envisage various different routes for the review, appeal and final determination of an assessment to tax. These provisions apply also to a Regulation 80 determination, pursuant to Regulation 80(5).[87]Mr Stone’s submission was that where (as was the case for all of the present claims) the relevant Regulation 80 determinations have been appealed to HMRC by the taxpayer, HMRC may offer a statutory review under s. 49C TMA 1970, in respect of which there is no time limit, and in doing so issue a “view of the matter” letter. That “view of the matter”, HMRC contended, could uplift the original Regulation 80 amount. If the taxpayer did not accept HMRC’s offer of a statutory review, the “view of the matter” would then stand as the final amount. If the taxpayer accepted the offer of a review or notified the appeal to the FTT, HMRC would also in principle have the power to seek to recover the amount, albeit that in the case of a statutory review by HMRC that would turn on the outcome of the review process, and in the case of an appeal to the FTT the final outcome would obviously be a matter for the FTT.[88]Overall Mr Stone contended that the statutory review and appeal mechanisms provided HMRC with the “power to recover” an amount that was greater than stated in the Regulation 80 determinations, once the taxpayer had (as with the claims in the present case) appealed those determinations to HMRC.[89]The first set of reasons for objecting to this analysis (advanced by the Fluid claimants) was based on the wording of the relevant provisions of the TMA 1970. Mr Goodfellowreferred to s. 30A(4) TMA 1970, which provides that an assessment may not be altered except in accordance with express statutory provisions, submitting that this precludes an uplift of the Regulation 80 amount in a “view of the matter” letter. He also referred to HMRC’s guidance on varying an assessment (EM3267), which as it stood at the relevant time identified only three permissible methods of variation: under s. 54 TMA 1970 (which deals with the settling of appeals by agreement), upon a statutory review, or by the FTT on appeal. In addition, he pointed out the absence of a specific power under s. 49C to vary the assessment in the “view of the matter” letter, in contrast to s. 49E which contains a specific power to “vary” on a statutory review by HMRC.[90]We do not accept those arguments. In our judgment the “view of matter” given when HMRC notify an offer of a statutory review is capable of uplifting the Regulation 80 amount, such as to provide a power to recover the uplifted amount. That is borne out in particular by the structure and language of s. 49C, which support the conclusion that the “view of matter” may differ from the original assessment and may therefore set out either a greater or a lesser amount of tax.[91]In particular, s. 49C(4) provides that if the taxpayer does not accept HMRC’s offer to review the matter within the specified period for acceptance, the “view of the matter” is treated as if it were a written agreement under s. 54(1) for the settlement of the matter. As set out above, the consequence is as if the FTT had determined the appeal in the way provided for in the settlement agreement.[92]Indeed, if s. 49C(4) did not have that effect, it would serve no purpose: the legislation would simply have stated that the original assessment would then stand as a s. 54(1) agreement. Instead, the statutory review provisions make clear that the “view of the matter” is distinct from the original assessment. It is the “view of the matter” (not the original assessment) that may be upheld, varied or cancelled on a statutory review under s. 49E. The review conclusion to uphold, vary or cancel that “view of the matter” will then be final under s. 49F if no appeal is notified to the FTT.[93]It is also relevant that any variation to the original assessment is not a direct result of the provision by HMRC of its “view of the matter”, but is effected by treating the “view of matter” as a settlement agreement under s. 54(1), carrying the consequence of a variation of the original assessment. There is thus no inconsistency with s. 30A(4): the variation occurs through an express statutory mechanism. To the extent that there is any inconsistency with the EM3267 guidance, that cannot determine the correct legal analysis, and we observe in any case that the guidance has subsequently been updated to make express reference to a variation effected by sending a “view of the matter” letter, which is then treated as a s. 54(1) agreement by virtue of s. 49C(4).[94]The power to vary the original assessment figure when providing the “view of the matter” also fits rationally with the statutory scheme. HMRC is thereby enabled to amend its original assessment in light of the information provided by the taxpayer during the appeal process. Any variation is, however, subject to protection for the taxpayer, who can notify the appeal to the FTT, or accept HMRC’s offer of a statutory review. In the latter case the review may lead to the “view of the matter” itself being varied or cancelled; and the taxpayer can also still then notify the appeal to the FTT if dissatisfied with the outcome of the statutory review.[95]The second set of arguments (again advanced by the Fluid claimants) was based on the primary and secondary legislation which introduced the review mechanism in ss. 49A–49I TMA 1970, namely the Finance Act 2008, s. 124 and the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009, Arts 1–6 and Sch 1 §§5–63). Mr Goodfellowargued that neither of these conferred a power to vary or increase assessments in a “view of the matter” letter.[96]We do not think that the terms of the enabling legislation preclude a variation of the tax amount by HMRC in a “view of the matter” letter pursuant to s. 49C. Section 124(1) of the Finance Act 2008 permitted the making of provisions “for and in connection with” reviews and appeals. That provision is drafted in broad terms, making no mention of the concept of a “view of the matter”, or indeed the power to vary the amount upon a statutory review by HMRC. It is therefore difficult to see how the absence of specific reference to a variation of the assessment as a possible outcome of the review process could carry any implication that such a power should be excluded. The Transfer Order then implemented s. 124(1) by introducing ss. 49A–49I into TMA 1970. That Order was, however, simply the vehicle for making the amendments to TMA 1970 (along with amendments to other pieces of legislation). It is therefore unsurprising that it did not provide any more detail as to HMRC’s specific powers when giving a “view of the matter”.[97]The third set of arguments (relied upon by both the Fluid claimants and Airedale) concerned the interaction between HMRC’s powers in the review and appeal mechanisms set out in ss. 49A–49I TMA 1970, and the decisions taken by the taxpayers and FTT. Various different submissions were made in this regard.(1) Mr Mullan argued that any “view of the matter” uplift was not a unilateral decision for HMRC, in that the uplift would only be treated as final under s. 49C(4) if the taxpayer neither accepted the offer of a statutory review nor notified an appeal to the FTT. Mr Mullan also argued that the taxpayer could prevent an uplifted assessment simply by withdrawing its appeal to HMRC.(2) Mr Goodfellow argued that if the claimants’ appeals had been notified to the FTT, whether before or after any statutory review was sought or offered by HMRC, the claimants could then have sought to withdraw those appeals (under r. 17 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009), which would have rendered the original determinations final under s. 54(4) TMA 1970. While HMRC could have opposed withdrawal, it would then have been a matter for the FTT as to whether or not the appeals would be permitted to be withdrawn.(3) Mr Goodfellow also said that even if appeals to the FTT proceeded, any increase in the determination would ultimately have been a matter for the FTT. On that basis, he said that HMRC did not have any unilateral “power to recover” amounts greater than those stated in the Regulation 80 determinations; rather, its ability to do so was subject to decisions taken by the claimants and the FTT.[98]We do not accept those submissions. The concept of a “power to recover” cannot in our judgment sensibly require that the sum sought by HMRC is immediately payable on the basis of a unilateral decision by HMRC. Rather, “power to recover” is broad enough to cover the situation where HMRC is able to take steps that put it in a position to recover the relevant amount. The operation of the review and appeal processes, and the possibility of various different final outcomes under those processes, therefore does not undermine the conclusion that, following an appeal to HMRC initiated by the taxpayer, HMRC has the “power to recover” an uplifted amount of tax by offering a statutory review, and pursuant to that process providing a “view of the matter” letter which varies the amount specified in the Regulation 80 determination. By doing so HMRC is taking steps which put it in a position to recover the varied amount, albeit that this will then be subject to the decisions thereafter taken by the taxpayer and (if the appeal is notified to the FTT) any final judicial determination. As set out above, the taxpayer cannot unilaterally withdraw an appeal (whether or not it has been notified to the FTT).[99]Finally, Mr Mullan advanced a further argument concerning the operation of the FTT appeal process. He contended that HMRC’s alternative argument relied upon the FTT having jurisdiction to uplift an assessment in an appeal notified to it, which he said was misconceived because the FTT’s jurisdiction on an appeal was circumscribed by the grounds of appeal relied upon by the taxpayer. He relied in this regard on the decision of the Tribunal in HMRC v BlueCrest Capital [2022] UKUT 200 (TCC), which concluded at §173 that the scope of an appeal to the FTT was governed exclusively by the appellants’ grounds of appeal. His argument was that if a taxpayer’s appeal to the FTT is based on grounds which do not put in issue the amount of the assessment, the amount cannot then be varied by the FTT, as that issue is not then within the scope of the appeal.[100]This argument appears to have misunderstood HMRC’s alternative argument. In the present case, as set out above, the claimants had appealed the relevant Regulation 80 determinations to HMRC, but had not notified any of those appeals to the FTT. Mr Stone was therefore not specifically relying on an amendment of the determinations through an FTT appeal process (although he pointed out that this would be one way of uplifting the determinations, if an appeal were to be notified to the FTT). Rather, his main submission was that since all of the appeals to HMRC were still pending at the time of the settlement agreements, HMRC could at that time have offered statutory reviews pursuant to s. 49A TMA 1970, accompanied by “view of the matter” letters which uplifted the Regulation 80 determinations. We did not understand Mr Mullan’s argument to be that HMRC would have been precluded from doing so by the terms of the claimants’ initial appeals to HMRC; and in any event we have seen no evidence suggesting that any of those appeals were made on grounds which limited HMRC’s power to uplift the relevant amounts if it had offered a statutory review and provided a “view of the matter” letter.[101]If an appeal had, however, been notified to the FTT by the taxpayer, we consider that HMRC would have been able to seek to uplift the original assessment, whether or not the grounds of appeal put in issue the amount of the assessment. In Orsted Westv HMRC [2025] EWCA Civ 279, Newey LJ cited with approval (at §123) the conclusions of the Court of Appeal in Investec Asset Finance v HMRC [2020] EWCA Civ 579, where Rose LJ held that HMRC was able to put forward a case on appeal to the FTT seeking a greater tax liability than originally set out in a closure notice. She referred to the “venerable principle” to the effect that there is a public interest in taxpayers paying the correct amount of tax. Newey LJ went on to apply the same reasoning to the scope of an appeal against an amendment to a self-assessment tax return, finding that it should be possible for the FTT to give effect to its conclusions on the matter to which the appeal related by doing more than correcting the specific amendment in issue, if appropriate (§§128–135). Those authorities do not support a narrow construction of the scope of an appeal to the FTT, which would preclude the FTT from concluding that the correct amount of tax was greater than stated in the Regulation 80 determination, if the taxpayer had not specifically put that point in issue.[102]Our conclusion is therefore that where the taxpayer has appealed a Regulation 80 determination to HMRC, and either the taxpayer requests a statutory review or HMRC offers a statutory review of that determination, HMRC must issue a “view of the matter” letter; and that “view of the matter” may indicate a different amount of tax payable to the amount set out in the relevant Regulation 80 determination. That provides HMRC with a “power to recover” for the purposes of DRRS §3.1.27.3.[103]That conclusion is, however, subject to the following qualification. A request for a statutory review by the taxpayer or an offer of a review by HMRC is a request or offer to review “the matter in question”, and the “view of the matter” letter provides HMRC’s “view of the matter in question”. The “matter in question” is (as defined in s. 49I TMA 1970) the matter to which the appeal relates – in this case the disputed Regulation 80 determination. HMRC’s “view of the matter” is therefore circumscribed by the scope of the Regulation 80 determination under appeal. If that determination refers to specific employees, HMRC cannot use a “view of the matter” letter to uplift the liability to tax by reference to contributions to different employees. HMRC accepted that point, and did not seek to contend that it had a power to recover in relation to employees different to those specifically referenced in any of the Regulation 80 determinations relied upon.[104]While Mr Stone’s submissions did not go as far as accepting that the scope of a Regulation 80 determination could be circumscribed by a particular scheme referred to in that determination, such that it could not be uplifted by reference to a different scheme, that was in practice the approach that HMRC took in the decisions before us. That was, for example, the reason why for Fluid Scotland part of the PAYE settlement sum was assessed under the reasonable disclosure condition rather than the power to recover condition: see §115(4) below.)We do not, therefore, need to decide whether a Regulation 80 determination referring to one scheme could in principle be uplifted by reference to contributions under a different scheme, since that issue does not arise on the facts before us.[105]The issue that does arise on the facts is whether a “view of the matter” letter can uplift an assessment amount by reference to additional contributions under the same scheme as considered in the original Regulation 80 determination. In our judgment, if a Regulation 80 determination makes a general reference to payments under an EBT or EFRBS scheme, without referencing a specific contribution, the “matter in question” to which the appeal relates clearly enables HMRC to consider additional contributions to that scheme.[106]We make one final observation about the way in which the arguments were put by HMRC on this point. Given our analysis above as to the way in which HMRC may seek to uplift the amount stated in a Regulation 80 determination, although we have found that HMRC did not “issue a determination” for the purposes of DRRS §4.5.1 where the Regulation 80 determination in question was for a lower amount than subsequently claimed by HMRC in the relevant settlement agreement, it seems to us that it is at least arguable that HMRC did nevertheless have “power to issue such a determination”, in the form of its “view of the matter” letter, leading to the variation of the original assessed amount under the determination (subject of course to the outcome of any review or appeal process). HMRC’s argument was not, however, put on this basis. We therefore express no concluded view on this point, but simply note it for completeness in case this issue arises again in a future case.

Power to recover NICs

[107]As noted above, the NICs uplift issue arose in relation to Fluid London for the year 2009/10, for which it was common ground that HMRC had issued a s. 8 decision and county court proceedings. It was also common ground that HMRC could in principle have amended its s. 8 decision under Regulations 5 and 6 of the Social Security Contributions (Decisions and Appeals) Regulations 1999. The only question was therefore whether HMRC’s ability to apply to the county court to amend the amount specified in its original county court claim, to reflect a new s. 8 decision, gave it a “power to recover” for the purposes of DRRS §3.1.27.3 read together with §4.5.2.[108]As Mr Stone explained, following the expiry of the relevant limitation period for bringing a new claim, CPR r. 17.4(2) permits the court to allow an amendment whose effect is to add or substitute a new claim, if the new claim arises out of the same facts or substantially the same facts as are already in issue on the existing claim. He accepted that this would have required an application by HMRC to amend, and a decision by the county court permitting that amendment. He contended that this did not prevent HMRC from having a “power to recover” the varied amount of tax.[109]We agree. The same reasoning applies as in the case of the power to recover income tax: HMRC’s ability to make an application to amend its county court claim meant that it was in principle able to take steps that put it in a position to recover the relevant amount. The fact that such an application would then have fallen to be determined by the court does not undermine that conclusion. As in relation to tax, DRRS §3.1.27.3 requires the existence of a power, not that all steps pursuant to the exercise of that power have been completed.[110]We do not accept Mr Elliott’s submission that CPR r. 17.4(2) would have been inapplicable because a replacement decision issued under Regulations 5 and 6 would have been a new decision. The relevant question is whether the new claim arises out of the same or substantially the same facts as already in issue on the existing claim. We address this on the facts of the NICs claim for London Fluid below. Application to the claims Preliminary comments[111]The reasons for the disputed decisions by HMRC are set out in the decision letters of Ms Robinson (for the Fluid claimants) and Ms Fletcher (for Airedale), as summarised at §§35–53 above. The witness evidence did not reveal any significant divergence between the understanding of the decision makers (i.e. Ms Robinson and Ms Fletcher) and their written decisions. Nor did Ms Robinson’s reasoning differ as between the respective Fluid claimants, or from that given by Ms Fletcher in her review decision in respect of Airedale.[112]The core reasoning in all three decisions is as set out at §39 above, and for convenience we replicate it here:
“Although the decisions in place at the time of settlement did not equate to the total settlement amount included in the agreement, they were under appeal and capable of being uplifted prior to settlement either by agreement or varied in a review. If the decision(s) contains the correct class of employees, and the correct tax periods, HMRC can have the value of the assessment(s) uplifted by a tribunal. HMRC has recent case law in its favour in that respect in the case of The Commissioners for H M Revenue and Customs v C M Utilities-Limited 2017UKUT 0305.”
[113]From this it can be seen that neither Ms Robinson nor Ms Fletcher relied on the deeming provision of §4.5.1. Instead, they relied on the fact that the relevant Regulation 80 determinations and s. 8 decisions were capable of being uplifted either by agreement, or on a review, or by the FTT.[114]That reasoning, while expressed in concise terms, was correct. It referred to the range of review and appeal mechanisms available to HMRC under ss. 49A–49I TMA 1970, pursuant to which HMRC could have sought to uplift the amounts set out in the Regulation 80 determinations. As we have already explained, we do not consider that the concept of a “power to recover” was intended to mean the power to take a decision on an immediate and unilateral basis. It is sufficient, in our view, that following an appeal by the taxpayer (which Ms Robinson and Ms Fletcher correctly noted was the case here) HMRC was able to provide a “view of the matter” letter which would have put it in a position to recover the varied amount. The way in which that variation would ultimately have been effected would have been by treating the view of the matter as a settlement agreement, or by a variation following a statutory review process, or by the FTT if an appeal had been notified to it by the taxpayer. The reasoning in Ms Robinson and Ms Fletcher’s review decisions, set out above, captured all three of those possible outcomes.

Fluid Scotland

[115]We apply our conclusions above to the specific settlement amounts for which Fluid Scotland seeks repayment, as follows:(1) 2008/09 – HMRC issued a Regulation 80 determination in the sum of £80,000 for “All employees in receipt of payments from the Employee Benefit Trust”. The PAYE settlement figure for that year was £127,999.40, referencing contributions for the benefit of Mr O’Connor, the sole director of the company, under the Montpelier BBT. The Regulation 80 determination figure was capable of being uplifted, on the basis set out above, to the PAYE settlement figure.(2) 2009/10 – HMRC issued a Regulation 80 determination in the sum of £40,000 for “All employees receiving payments from the business benefit trust”. There were two PAYE settlement sums for that year, but Fluid Scotland only claims repayment in relation to one of those settlements, which was for £75,561 in relation to contributions for the benefit of Mr O’Connor under the Montpelier BBT. The Regulation 80 determination was capable of being uplifted, on the basis set out above, to cover that sum.(3) 2010/11 – HMRC issued a Regulation 80 determination in the sum of £255,868 for “Peter Sidney O’Connor”. The PAYE settlement figure for that year was £277,923, referencing contributions for the benefit of Mr O’Connor under an EFRBS. The Regulation 80 figure was capable of being uplifted, on the basis set out above, to the PAYE settlement figure.(4) 2011/12 – HMRC issued a Regulation 80 determination for the sum of £478,000 for “earnings of all employees arising from transactions related to [EFRBS scheme 650]”. The PAYE settlement figure for that year was £920,841.81, of which £481,474.50related to a £1m contribution for the benefit of Mr O’Connor in September 2011 under EFRBS scheme 650. The Regulation 80 determination figure was capable of being uplifted, on the basis set out above, to the latter figure. The remainder of the PAYE settlement sum related to a further £1m contribution for the benefit of Mr O’Connor in March 2012 under EFRBS scheme 549. HMRC accepted that it had not issued a Regulation 80 determination in relation to that scheme (see §40 above), and its basis for refusal of repayment in relation to that scheme was not therefore the power to recover condition, but rather the reasonable disclosure condition. This is considered further below.

Fluid London

[116]The application of our conclusions above to the specific settlement amounts for which Fluid London seeks repayment is as follows:(1) 2008/09 – HMRC issued a Regulation 80 determination in the sum of £197,427.60 for “Mr Adrian Wynne”, the sole director of the company. The PAYE settlement figure for that year was £199,768, referencing contributions for the benefit of Mr Wynne under two different schemes, the Montpelier BBT and a separate employee benefit trust, although it appears from the correspondence that the sum due related entirely to a contribution under the Montpelier BBT. The Regulation 80 determination figure was capable of being uplifted, on the basis set out above, to the PAYE settlement figure.(2) 2009/10 – HMRC issued a Regulation 80 determination in the sum of £120,200 for “All employees receiving payments from the business benefit trust”. The PAYE settlement figure for that year was £198,022.60, again referencing contributions for the benefit of Mr Wynne under the Montpelier BBT and another employee benefit trust, although again the sum appears to relate entirely to a contribution of £600,000 under the Montpelier BBT. The Regulation 80 determination figure was capable of being uplifted, on the basis set out above, to the PAYE settlement figure.(3) 2009/10 – a second contribution for the benefit of Mr Wynne was made in March 2010, for £450,000, this time under EFRBS scheme 10567557 (scheme 105), leading to a separate settlement of PAYE in the sum of £159,574.47. There is no dispute about that settlement; but it is relevant in the context of a further contribution under the same scheme, addressed in the next paragraphs.(4) 2009/10 – a third contribution for the benefit of Mr Wynne was made, also in March 2010, for £600,000, also under scheme 105. Fluid London originally contended that there was no Regulation 80 determination in relation to that contribution. It has now been established that HMRC did issue a further Regulation 80 determination for the tax year 2009/10 in the sum of £173,044.20 for “All employees receiving payments from the business benefit trust – Mr A Wynne”. That was sent under cover of a letter dated 14 February 2014 which stated that the determination was in respect of the use of scheme 105, and set out HMRC’s view that “contributions made to an EFRBS under the arrangements disclosed to HMRC under the above scheme reference may be earnings subject to PAYE tax and Class 1 NICs”. The PAYE settlement for 2009/10 did not, however, reference the March 2010 contribution of £600,000. Instead, that contribution was included in the PAYE settlement for the following year 2010/11, alongside a further contribution for the benefit of Mr Wynne in the 2010/11 tax year, giving a total PAYE figure of £593,537.20. The PAYE settlement figure for 2010/11 therefore included an amount referable to a contribution for which HMRC had issued a Regulation 80 determination, which was capable of being uplifted on the basis set out above. We do not consider it material that the settlement figure in this regard was included in the calculation for the wrong tax year. The question, for the purposes of DRRS §3.5.1.27, is whether the amount paid under the settlement agreement was an amount that HMRC had the power to recover at the time the agreement was made. For the reasons just given, HMRC did have the power to recover that amount. Contrary to Mr Goodfellow’s submissions, the further contribution, made in respect of the same scheme in relation to which a further Regulation 80 determination had already been made, was clearly within the scope of the determination.(5) 2009/10 – there is also a dispute regarding the NICs element of the March 2010 £600,000 contribution for the benefit of Mr Wynne. As with the PAYE settlement figure for that contribution, the NICs element of the settlement was included in the settlement for the year 2010/11. There is no dispute that two s. 8 decisions were issued for 2009/10. A county court claim was also issued by HMRC on 30 March 2015 for the tax year ended 2010, referring to “Class 1 NIC due on Employer Financed Retirement Benefit Scheme”, claiming £150,803.16 plus interest. Fluid London’s submission was that the s. 8 decisions related to the NICs on the first two contributions for the benefit of Mr Wynne for the 2009/10 tax year (based on the Regulation 80 determinations sent at the same time), and did not cover the March 2010 £600,000 contribution; and that the county court claim likewise did not refer to that contribution. Mr Elliott contended that any amendment to the county court claim would not have arisen out of the same facts or substantially the same facts, given that any NICs payable in respect of the March 2010 £600,000 contribution would have related to a different transaction and a different amount to those already in issue in the county court claim. We reject those arguments. The second of the two s. 8 decisions stated that it concerned referring to scheme 105, together with the further Regulation 80 determination referred to in (4) above. As noted above, the cover letter referred specifically to the use of EFRBS scheme 105. In those circumstances, the s. 8 decision could clearly have been varied so as to include a further contribution to the EFRBS. The county court claim also specified NICs due under an EFRBS for the tax year 2009/10. The March 2010 £600,000 contribution was a contribution under an EFRBS scheme in that tax year, and was indeed a contribution under the same scheme as had been used for the March 2010 £450,000 contribution. The NICs claimed under the settlement in respect of the March 2010 £600,000 contribution therefore undoubtedly arose out of the same or substantially the same facts as in issue on the existing county court claim.(6) 2010/11 – on the basis explained above, namely that the March 2010 £600,000 contribution was properly attributable to the 2009/2010 tax year, we do not understand any further claim to be pursued in relation to the PAYE and NICs settlement for 2010/11.(7) 2011/12 – HMRC issued a Regulation 80 determination in the sum of £65,250 for “Earnings of all employees arising from transactions related to [EFRBS scheme 650]”. The PAYE settlement figure for that year was £1,372,500, referencing contributions for the benefit of Mr Wynne under various different scheme reference numbers, including scheme 650. It appears, however, from Fluid London’s evidence that the settlement figure did indeed relate to contributions made under scheme 650. The Regulation 80 determination figure was therefore capable of being uplifted, on the basis set out above, to the PAYE settlement figure.(8) 2012/13 – HMRC issued a Regulation 80 determination in the sum of £1,178,126.00 for “All employees with earnings arising from transactions related to the [EFRBS scheme 650]”. The PAYE settlement figure for that year was £1,197,000.54, again referencing contributions for the benefit of Mr Wynne under various different scheme reference numbers, including scheme 650. Again, however, it appears from Fluid London’s evidence that the settlement figure did indeed relate to contributions made under scheme 650. The Regulation 80 determination figure was therefore capable of being uplifted, on the basis set out above, to the PAYE settlement figure.

Airedale

[117]Of the Airedale claims in these proceedings, the only claim for which the power to recover issue is relevant is the claim for 2008/09. For that year HMRC issued a Regulation 80 determination in the sum of £768,070 specifying four named individuals. The PAYE settlement figure for those individuals, for that year, came to a total of £931,548.75, referencing contributions under two schemes, a Montpelier BBT scheme and an EFRBS scheme. The Regulation 80 determination figure was capable of being uplifted, on the basis set out above, to the PAYE settlement figure. Reasonable disclosure The parties’ submissions

Reasonable disclosure

[118]The issue of whether the claimants provided “reasonable disclosure” as defined in s. 20(5) of the Finance Act 2020 arises in respect of repayment claim amounts that are referable to loans and quasi-loans made on or after 9 December 2010, where HMRC did not have “power to recover”, but nevertheless refused repayment on the basis that the reasonable disclosure condition was not satisfied. The relevant years are 2011/12 for Fluid Scotland and 2011/12, 2012/13 and 2013/14 for Airedale.[119]HMRC’s submission, in summary, is that the definition of reasonable disclosure set out in s. 20(5) of the Finance Act 2020 requires disclosure of the amount, parties and date of the loan or quasi-loan, as well as the material steps in the loan or quasi-loan transaction, and any other information necessary to establish a reasonable case that income tax or NICs are payable in relation to the transaction. HMRC contends that this information must be clearly identifiable from the relevant tax returns, and it is not sufficient that information regarding the nature of a particular tax scheme has been provided (separately) to HMRC by the promoters of that scheme under the DOTAS regime, on form AAGs.[120]The claimants dispute HMRC’s interpretation, contending that it goes beyond the requirements of s. 20(5). Their submission was that it is sufficient that the information set out in s. 20(5) is ascertainable from the relevant tax returns read in context and (Mr Goodfellow submitted) together with the further information provided by the scheme promoters on form AAGs. The claimants emphasised that this did not require every detail of the arrangements to be set out.[121]Mr Goodfellow also argued (for Fluid Scotland) that Ms Robinson’s approach to concluding that there had been no reasonable disclosure was flawed, because she had applied too high a test when considering whether, under s. 20(5)(d), a reasonable case could be made that the relevant amount was payable to HMRC. By contrast, in relation to Airedale,Mr Mullan did not pursue an argument that Ms Fletcher had applied the wrong test in her review decision. He (sensibly, in our view) acknowledged that if the Tribunal did not agree with him on the statutory interpretation of the provisions and their application to Airedale’s disclosures, any error in Ms Fletcher’s approach would not alter the outcome.[122]As with the power to recover condition, we start by addressing the interpretation of the reasonable disclosure condition, before considering HMRC’s application of that condition to the facts of the claims.

The interpretation of s. 20(5) of the Finance Act 2020

[123]The relevant provisions are set out above. They key provision is the definition of reasonable disclosure in s. 20(5) of the Finance Act 2020 (§16 above). That requires the relevant tax return, or two or more tax returns taken together, to(a) identify the loan or quasi-loan,(b) identify the person to whom the loan or quasi-loan was made,(c) identify the arrangements under which the loan or quasi-loan was made and(d) provide such other information as sufficient to make it apparent that a reasonable case could have been made that the amount of tax concerned was payable to HMRC. That definition is incorporated by reference into the definition of “voluntary restitution” in DRRS §3.1.27.5: see DRRS §4.7 (§21 above).[124]The disputed issues of interpretation are twofold. First, is it sufficient that some of the required information for a particular scheme is set out on the form AAG provided by the scheme promoter to HMRC, where the tax return includes the reference number of the relevant scheme? Secondly, what information or detail is required to satisfy “reasonable disclosure” for the purpose of s. 20(5) of the Finance Act 2020?

Source material for “reasonable disclosure requirement”

[125]The question of whether the information required by s. 20(5) of the Finance Act 2020 can be provided on the form AAG(s) for the scheme(s) referred to in the relevant tax returns was considered in the recent judgment of Dias J in R (Sensor Solutions) v HMRC [2024] EWHC 1119 (Admin). That was also a case where HMRC had rejected the taxpayer’s repayment claim under the DRRS on the grounds the claimant had not made reasonable disclosure. The claimant relied on the scheme information contained in the promoters’ AAG forms. While it conceded that the AAG forms did not strictly form part of its tax returns as defined in s. 20(8) of the Finance Act 2020, it argued that the AAG forms were essential to the correct interpretation of the tax returns, so should have been taken into account by HMRC as a matter of fairness (§§23–25).[126]That argument was rejected by Dias J. She noted that the extent and content of the duty of fairness depended on the particular legal context (§27). In the context of s. 20(5) and (8) of the Finance Act 2020, she explained that (§§28–29):
“In the present case, Parliament has expressly prescribed in sections 20(5) and (8) of the Act what is to constitute ‘reasonable disclosure’. In so doing, it has evinced a clear intention that reasonable disclosure for the purposes of the section is only to be found in one or more tax returns as there defined. The underlying rationale is presumably two-fold: (i) to reduce the burden on HMRC by restricting the ambit of the documents it must consider to those which have unarguably been presented to it and which it is likely still to retain in its records and thus avoiding it having to trawl through all of its records for material which may or may not throw light on matters; and (ii) to put the onus firmly on the taxpayer to have made reasonable disclosure in those documents without requiring HMRC to have to spend time trying to join the dots if the picture is not immediately clear. Although [counsel for the claimant] insisted to the contrary, it seems to me that this is the clearest possible exclusion of any power (let alone an obligation) to look outside the four corners of the tax returns in order to find reasonable disclosure. To do so would be effectively to include the AAG forms in the definition of ‘tax return’ notwithstanding the Claimant’s concession that they were not so included. Section 20(5) defines what amounts to reasonable disclosure and in my judgment that is an exhaustive definition. In other words, there is no scope to go outside the four corners of the sub-section in assessing what does or does not constitute reasonable disclosure. It is not for the courts or HMRC to usurp the legislative function and override the definition of reasonable disclosure which Parliament has chosen to adopt merely because it might be ‘fair’ to do so. The duty of fairness is directed squarely at procedures and the manner in which public bodies reach their decisions, not at the substance of the law. I can see nothing in the concept of procedural fairness which mandates the wholesale alteration of the substantive law.”
[127]Dias J went on to hold that fairness therefore did not require the HMRC officer to take the AAG forms into account, and that since the taxpayer had conceded that it had no case without the AAGs, its claim failed (§§30–32).[128]Mr Goodfellow sought to distinguish Sensor Solutions on the basis that in that case the claimant conceded that the AAG forms did not form part of the tax return. He did not make that concession. Mr Goodfellow’s submission was that if the relevant tax returns made reference to disclosure of tax avoidance schemes (by ticking the relevant box on the corporation tax return) and provided the reference numbers of any schemes used by the company, that effectively incorporated by reference the information provided by the promoters in the AAG forms relating to those schemes.[129]We do not accept that submission. In our judgment, taking account of the statutory language, the rationale for the requirements of s. 20(5), and the DOTAS notification obligations, the AAGs provided by scheme promoters cannot be regarded as incorporated into the corporation tax returns of companies using the relevant schemes, and the claimant in Sensor Solutions was therefore right to concede that point.[130]In that regard the first point to make is that s. 20(5) requires the “reasonable disclosure” to be made in one or more tax returns. Section 20(8), as set out above, defines a tax return as either “a return made under s. 8 of TMA 1970 and any accompanying accounts, statements or documents” (which refers to an individual’s self-assessment tax-return), or “a return made under paragraph 3 of Schedule 18 to FA 1998” (which refers to a corporation tax return).[131]Under s. 8(1) TMA 1970, the individual taxpayer is to make or deliver “a return containing such information as may reasonably be required in pursuance of the notice, and to … deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required”. Under §3 of Schedule 18 to the Finance Act 1998 the company is required to deliver a return containing “such information, accounts, statements and reports –(a) relevant to the tax liability of the company, or(b) otherwise relevant to the application of the Corporation Tax Acts to the company, as may reasonably be required by the notice”.[132]The information provided by an AAG is not captured in the above provisions. An AAG is not filed by the taxpayer (whether an individual or a company). It is filed by a different person (the scheme promoter) and under a different statutory regime established by the Finance Act 2004, Part 7 and the secondary legislation made thereunder. As Dias J noted at §14 of Sensor Solutions, the DOTAS regime was set up:
“for the purpose of providing HMRC with information about structures which they believe are being marketed as tax avoidance schemes. Promoters of such a scheme are required to notify HMRC of the mechanics of the scheme by means of form AAG1, after which they are given a Scheme Reference Number (‘SRN’). Each scheme has a single SRN irrespective of the number of individuals or companies using it. The promoter notifies the SRN to each taxpayer using the scheme on form AAG6 and the taxpayer is then obliged to notify HMRC that it is using the scheme and to supply the relevant SRN.”
[133]As described there, the taxpayer will receive the Scheme Reference Number (SRN), and is required to use that to notify HMRC on its tax return that it is using that scheme. The taxpayer will not, however, necessarily have the details of the scheme provided by the promoter to HMRC on the AAG form. Indeed, as Mr Goodfellow acknowledged in his submissions, it appears that Fluid Scotland’s accountants did not have a complete set of the relevant AAG forms for the schemes that it was using.[134]If the intention had been to include the information provided by a scheme promoter in a DOTAS notification alongside the tax returns, for the purposes of the reasonable disclosure requirement, it would have been straightforward to include that in s. 20(5). Notably, however, s. 20(5) requires the information to be provided in one or more tax returns, as defined. We agree with and adopt the reasoning of Dias J in Sensor Solutions as to the rationale for that requirement. As she explained at §29, the intention must have been to place the onus on the taxpayer to provide the information required, and to limit the compass of the documents which HMRC was required to consider for that purpose. That was a clear legislative choice, which points strongly towards the AAG information not being considered part of the return.[135]We also note, as an aside, that if a tax return were to be taken as incorporating by reference information in one or more AAGs which had been provided by the scheme promoters, that would sit oddly with the provisions in s. 8(2) TMA 1970 and §3(3) of Schedule 18 to the Finance Act 1998 stipulating that the return shall include a declaration by the person making the return that the return is, to the best of the person’s knowledge, correct and complete.[136]Mr Goodfellow sought to rely on an internal HMRC operational note, provided as an exhibit to Ms Robinson’s witness statement, entitled Loans which are no longer within loan charge because the customer made a reasonable disclosure of their loans and we had not taken steps to recover the tax due on those loans by 5 April 2019. Under the heading “Reasonable disclosure – Scheme Reference Numbers” the note provided the following guidance:
“Inclusion of a DOTAS scheme reference number in a relevant return does not automatically qualify as a reasonable disclosure. Where a DOTAS scheme reference number is included in a relevant return, we should review the DOTAS disclosure and consider whether it covers any of the information required for a reasonable disclosure. For example, it may identify the relevant arrangement under which the loan or quasi loan was made. It may also give enough information for HMRC to identify that income tax was due on the loan or quasi loan as employment or trading income. It is less likely to identify the loan and person to whom it was made but it may do and we should consider each DOTAS disclosure with the full information in relevant returns in order to form our view on whether a reasonable disclosure has been made.”
[137]The evidence filed on behalf of HMRC by Felix Bracher also indicated that if a DOTAS number had been provided, the contents of the relevant AAG form would be considered by HMRC for the purposes of making a decision on reasonable disclosure.[138]We do not consider that this alters our conclusions above. HMRC internal guidance and practice cannot determine the correct statutory interpretation of s. 20(5). While HMRC may, as a matter of practice, have regard to the AAGs filed in relation to particular DOTAS schemes where those schemes are referred to on a tax return, the effect of our conclusions above is that it is not required to do so under s. 20(5), and a decision rejecting repayment on the basis of failure to make reasonable disclosure cannot be impugned on the basis that relevant information was or may have been provided in documents other than tax returns. The s. 20(5) conditions[139]The other question of interpretation concerns the scope and effect of the specific conditions in s. 20(5)(a)–(d). As a preliminary point, it was common ground that the test in s. 20(5) is a bespoke test and does not adopt (for example) the existing language of s. 29(5) TMA 1970 concerning the circumstances where the information provided to HMRC precludes a discovery assessment for additional income or capital gains tax under s. 29(1). We do not, therefore, consider that guidance issued by HMRC in relation to the different circumstances of a discovery assessment is applicable to the interpretation of s. 20(5). Rather, it is necessary to focus on the content of that provision.[140]In determining whether the disclosure satisfies the requirements of s. 20(5), the question must be whether the required information is identifiable on the basis of the relevant tax returns. We accept that HMRC can be expected to draw what Dias J described as “obvious inferences” from the information provided (Sensor Solutions §37). It cannot, however, be expected to “embark on an exercise of joining the dots” (Sensor Solutions §§28 and 42).[141]Subparagraph (a) – the qualifying loan/quasi-loan. A loan or quasi-loan qualifies for the purpose of s. 20 of the Finance Act 2020 if it is made on or after 6 April 1999 and before 6 April 2016: see s. 20(7) (§16 above). As Dias J noted in Sensor Solutions, §39, the requirement in s. 20(5)(a) to identify the qualifying loan or quasi-loan must therefore identify not only the specific amount of the loan, but also the date on which the loan was provided. It is difficult to see how one can identify “the” particular loan or quasi loan which is said to refer to the relevant amount of repayment without stating these basic identifying features. The date of the loan is also necessary in order for HMRC to ascertain the tax year to which the loan is referable.[142]In his oral submissions Mr Stone also suggested that as part of identifying the loan or quasi-loan one needed to identify the parties to the transaction. We do not think that this is required by subparagraph (a). Identification of the recipient of the loan is, however, required by subparagraph (b), and subparagraph (c) requires the identification of the arrangements made to implement the loan, which is likely to require at the very least a general description of the parties involved.[143]Subparagraph (b) – the recipient of the loan/quasi-loan. The claimants’ submissions did not take issue with the requirement to identify the recipient of the loan. Rather, the dispute concerned the level of inference that HMRC could be expected to draw. It was common ground that a certain degree of inference is permissible. It is therefore not necessary for the tax return to state expressly that the recipient of the loan was Mr X: the return could instead, for example, say that the recipient was the sole director of the company, if the return elsewhere identifies that sole director. Whatever information is provided should nevertheless enable the beneficiary of the loan to be clearly identified. Whether the disclosure in the tax returns meets that test will inevitably be dependent on the particular facts.[144]Mr Goodfellow argued that it was sufficient that the identity of the beneficiary should be “ascertainable on a careful reading of the information”. That proposition was ambiguous. If it simply meant that the identity of the beneficiary should be clear from the relevant tax returns (read together if necessary), then we agree. If, however, it suggested an exercise in more extensive inferences and/or piecing the information together, that is precisely the approach which Dias J deprecated as placing an excessive burden on HMRC.[145]The dependency between subparagraphs (a) and (b) should also be noted. If the loan or quasi-loan has not been validly identified, then it is difficult to see how one can meaningfully identify the recipient of that loan or quasi loan.[146]Subparagraphs (c) and (d) – loan arrangements and further information. It is convenient to consider these subparagraphs together. The parties’ submissions principally concerned the degree of detail required in order to disclose the “arrangements” and the further “sufficient information” required.[147]As a general point, we note that these requirements must refer to information that goes beyond the information already contemplated by subparagraphs (a) and (b). In our view that must identify the transactions and steps giving rise to the loan or quasi-loan, although it need not necessarily describe these in exhaustive detail. As a minimum, in the case of a loan, that will require identifying the credit arrangement which has given rise to the loan. In the case of a quasi-loan, what is required is an explanation of how the person making the loan has obtained a right to a payment or transfer of assets, in connection with a payment or a transfer of assets to the recipient of the loan.[148]Mr Mullan submitted that the purpose of identifying the loan arrangements was to provide information that would be sufficient to alert HMRC to the need to open an enquiry. We disagree. The requirement is not to provide information that might cause HMRC to investigate matters further. Rather, subparagraph (d) provides that the information must be sufficient for “it to be apparent that a reasonable case could have been made that the amount concerned was payable”. That indicates that the information must of itself lead to the conclusion that a reasonable case can be made that the transaction is taxable. Again, however, what is sufficient in any given case will be dependent on the particular facts.

Application to the claims

[149]The remaining issue is the application of the principles discussed above to the facts of the decisions in respect of Fluid Scotland and Airedale.

Fluid Scotland: disclosure made

[150]In light of our conclusions above, the reasonable disclosure issue is relevant only to HMRC’s decision in relation to the 2011/12 tax year, in respect of a £1m contribution for the benefit of Mr O’Connor under EFRBS scheme 549 in March 2012. As set out above, HMRC accepted that it had no power to recover the sum of £439,367.31 included in the settlement agreement for that tax year in respect of that contribution. It therefore went on to consider whether reasonable disclosure had been made in relation to that contribution.[151]The disclosure provided by Fluid Scotland was set out in various company tax returns, including its tax computations and financial statements and accounts filed together with those returns. Those documents provided the following information:(1) The company tax return for the period 1 January 2012 to 31 December 2012 ticked, on the first page, the box entitled “Disclosure of tax avoidance schemes”; and a further box indicating that supplementary pages were provided for those schemes. The relevant supplementary page then provided two SRNs (one of which was for scheme 549), stating that the expected advantage had arisen in relation to the accounting period ending 31 December 2012.(2) The company financial statements for the accounting period ending 31 December 2012 identified Mr O’Connor as the sole director of the company during that period. Note 2 to those financial statements contained the following statement under the heading “Directors’ emoluments”:
“The Company, in order to motivate and incentivise its officers and employees, has made contributions to a previously established employer financed retirement benefit scheme for the benefit of the Company’s officers, employees and their wider families, The Fluid System Technologies (Scotland) Ltd 2011 EFRBS (‘the scheme’). Contributions were made to the scheme during the accounting period which created value in that scheme. The amount of such value which is held on terms which are discretionary is £1,980,050. Because no earmarking has yet taken place in respect of this amount, it is not considered that this amount can be regarded as directors’ remuneration and, therefore, it has been excluded from the overall figure above.”
Note 3, headed “Operating (loss)/profit, then included a figure of £2m representing “Employer Financed Retirement Benefit Scheme Contribution”. (3) The corporation tax computation for the period 1 January 2012 to 31 December 2012 included at note 5 a table entitled “Directors’ remuneration”, where the only entry was for Mr O’Connor, with a sum of £5,549. The same corporation tax computation contained at note 7 the following statement: “Employer Financed Retirement Benefit Scheme During the accounting period the Company made contributions of value equalling £2,000,000, constituting, in its opinion, the provision of qualifying benefits as defined by s. 1292 CTA 2009, under The Fluid System Technologies (Scotland) Ltd 2011 EFRBS (“the scheme”), as outlined in the accounts accompanying this return. £1,000,000 of the above contributions were made by way of payments to employees subject to their covenants to pay the amounts in future to a person chosen by the trustees of The Fluid System Technologies (Scotland) Ltd 2011 EFRBS. In our view, this does not constitute a loan and, accordingly, no form CT600A in respect of these amounts is attached to the form CT600. The remaining £1,000,000 of the contributions were made by the company transferring a covenant to the Scheme. The covenant requires the Company to pay an amount equal to £1,000,000 in ten years’ time with commercial interest accruing in the interim. By way of subsequent agreement between the parties, certain employees agreed to pay amounts equalling £1,000,000 to the Scheme on the conditions that the Scheme agreed to pay equal amounts to the Company. The employees did this in return for the company crediting their current accounts equalling £1,000,000. The Company, already owing £1,000,000 to the Scheme, offset the amount promised by the Scheme of £1,000,000 against the amount it owed to the Scheme of £1,000,000. HMRC’s decision[152]Ms Robinson’s reasoning in the review decision is set out above at §40. She took the view that the disclosure provided did not explain how the arrangement worked, the amounts loaned, the recipients of the loans or a clear indication that an earnings charge should have been applied.[153]Her witness statement of 16 November 2023 went into more detail on how she had approached her decision and her thought process in reaching it. She explained that in practice what she was looking for to constitute reasonable disclosure was: “information as to the amount of the loan, the date it was made, and to whom it was made, as well as the relevant arrangements under which the loan was made and any other information which would indicate that the sums paid were earnings liable to PAYE tax and NICs”.[154]She explained that she had rejected the repayment claim because there was no mention in the company accounts of how the arrangement worked, the amounts loaned or their recipients, nor was there a clear indication that a tax charge on employment income should have been applied such that PAYE tax and NICs might be due.[155]She disagreed with Fluid Scotland’s allegation that she had put the threshold too high, stating that she had been looking for a clear indication that an “earnings charge” should have been applied, because the tax concerned was made up of the PAYE and NICs that had been included in the settlement agreement. She noted that her use of the phrase “earnings charge” was her comment rather than part of the s. 20(5) test. Even without that reference, however, she said that her decision would still have been that there was no reasonable disclosure, as she saw “nothing that would indicate that PAYE and NICs were due”.[156]At the hearing, Ms Robinson was briefly cross-examined by Mr Goodfellow on the question of the test she had applied, based on her comments that she had been looking for a “clear indication” of liability to PAYE and NICs. We found Ms Robinson to be an honest and helpful witness. She candidly (and understandably) noted that given the passage of time since her review decision in December 2021, she could not recollect certain details of the points that she had considered in reaching that decision. She was nevertheless able to respond straightforwardly to the key questions put to her, accepting that she was looking for a “clear indication” in the material that she was looking at of “who the recipient of the loan was, the amount of the loan, how the scheme worked and a clear indication that tax is payable”; in those respects, she was looking for a “high degree of probability”; and that her reference in her decision to a lack of a “clear indication” that an earnings charge should have been applied was a reason for her refusing the claim and not just a comment.[157]We accept that evidence, noting its consistency with the terms of Ms Robinson’s decision letter and the factual statements in her witness statement. With these findings in mind, we will now consider whether Fluid Scotland’s claim that HMRC erred in its conclusion on “reasonable disclosure” is made out. Application of

The s. 20(5) conditions

[158]Subparagraphs (a) and (b) – the qualifying loan/quasi-loan and the recipient of the loan/quasi-loan. It is convenient to take the first two conditions together. As discussed above, these conditions require specification of the amount and date of the loan, and identification of its recipient. Fluid Scotland’s case was that its disclosure identified a quasi-loan. In the present case, therefore, the disclosure was required to specify a quasi-loan in the amount of £1m, in March 2012, made to Mr O’Connor.[159]Mr Goodfellow submitted that all of these could be deduced in the present case from reading the documents set out above. He said, in particular, that it was clear that the EFRBS sums referred to in the notes to the corporate tax computation must have been paid to Mr O’Connor, since he was the sole director of the company, and the company financial statements had noted that contributions to the EFRBS were not considered to be directors’ remuneration.[160]We consider this submission to be entirely hopeless. Even when the various notes set out above are considered together, there was nothing in those notes to identify how many transactions were involved, on what dates, and to which employees. Note 7 to the corporation tax computation referred to two sets of transactions, with total contributions of £1m for each set of transactions. Nothing in those notes set out a breakdown of the transactions or their dates. Indeed, since the corporation tax computation related to the calendar year 2012, it is not even possible to deduce from the notes relied on that anyloan at all was made in the 2011/12 tax year.[161]Nor did the notes state that the quasi-loans were made to Mr O’Connor: on the contrary, note 7 to the corporation tax computation referred to “payments to employees”, and agreements with “certain employees” in return for the company crediting “their accounts”, indicating that multiple employees were beneficiaries of the arrangements described there. Note 2 to the financial statements similarly stated that EFRBS contributions were made for the benefit of “the Company’s officers, employees and their wider families”, again indicating that multiple employees were beneficiaries. The mere fact that Mr O’Connor was the company’s sole director does not suggest that he was, contrary to those indications, the sole beneficiary of those arrangements.[162]Ms Robinson was therefore entirely correct to conclude that the information provided did not identify the amount, date or recipient of the loan in question. The “reasonable disclosure” condition was therefore not met, irrespective of any analysis under the remaining subparagraphs of s. 20(5). For completeness, however, we briefly consider the remaining subparagraphs below.[163]Subparagraphs (c) and (d) – loan arrangements and further information. We have already addressed (and rejected) Mr Goodfellow’s submission that the disclosure of the use of a DOTAS scheme in the company tax return sufficed to incorporate the contents of the AAG form for that scheme in the company’s disclosure for the purposes of s. 20(5). Ms Robinson therefore did not err in failing to consider the AAG for this particular scheme in her review decision.[164]That leaves the information provided by Fluid Scotland in its financial statements and corporation tax computation, set out above. Ms Robinson considered that this did not meet the requirements of s. 20(5). In our judgment she was right to take that view.[165]The only description of the nature of the arrangements was set out in note 7 to the corporation tax computation. That note referred to two sets of transactions, and it is not possible to discern from that which of those sets of transactions referred to the March 2012 contribution for the benefit of Mr O’Connor (not least because, as we have already found, nothing at all in the documents provided the dates of the arrangements referred to, or gave a breakdown of the amounts of the loans).[166]Even leaving that point aside, the description given in note 7 was too high-level and generic, and did not provide details of what precisely took place and which specific parties were involved. It cannot therefore be said that there was any adequate identification of the arrangements pursuant to which the transactions described in that note were made, let alone information sufficient for it to be apparent that a reasonable case could have been made that one or both of those transactions was liable to tax in the form of PAYE and/or NICs. As an obvious example of that, there was nothing in note 7 which identified that a “relevant step” had been taken by a third party (i.e. a party other than the employer) for the benefit of Mr O’Connor, for the purposes of the test for a quasi-loan in Part 7A ITEPA 2003.[167]Mr Goodfellow pointed to the fact that (as Dias J noted in Sensor Solutions at §45) HMRC had consistently been challenging loan schemes of this nature. He also noted that HMRC had regularly issued guidance indicating its view that the arrangements did not achieve their objective of avoiding liability to tax. By way of example, Spotlight 12 published on 6 November 2012, Taxing the rewards for work carried for a UK based employer, specifically mentioned that arrangements said to get round the disguised remuneration rules (i.e. Part 7A ITEPA 2003) might involve payments passing through a series of loans from third parties, setting out HMRC’s view that such arrangements did not succeed in avoiding tax and NICS. It further stated that current legislation ensured that “rewards and recognition received from working for UK-based businesses” was charged to UK income tax and NICs. The use of trusts and EFRBS to remunerate employees had also earlier been mentioned in Spotlights 5 and 6.[168]HMRC accepts that this was relevant background, and that it was (obviously) aware of the use of trust structures to remunerate employees. It emphasised, however, that the relevant question remains what could reasonably be deduced from the specific disclosure made on the facts of a particular case. We agree. The fact that HMRC regularly challenged employee remuneration arrangements involving trust structures did not allow it to “fill in the gaps” in a case where a company’s tax returns clearly failed to provide sufficient information for the purposes of s. 20(5), as was the case for Fluid Scotland. As we have already noted, the question is not whether the information provided was sufficient to indicate to HMRC the need to investigate further. Rather, to meet the s. 20(5)(d) test, it should have been apparent from that information (taken on its own) that a reasonable case could be made as to the liability to tax.[169]Mr Goodfellow also contended that HMRC must have had sufficient information for the purposes of s. 20(5)(d) since it did in fact issue Regulation 80 determinations in relation to the EFRBS schemes used by the Fluid claimants. We do not accept that argument. As Mr Stone pointed out, the tests are different: a Regulation 80 determination can be issued where it appears to HMRC that there “may” be further tax payable, and may be based on whatever further enquiries HMRC decides to carry out. That is not the same as showing that the information provided in the tax returns was sufficient to make it apparent that there was in fact a reasonable case as to the tax liability.[170]The disclosures relied on by Fluid Scotland did not therefore satisfy any of the four sub-paragraphs of s. 20(5). Ms Robinson’s decision to that effect was therefore substantively correct.[171]In so far as the wording of her decision letter and her evidence in these proceedings suggested that she was looking for a “clear indication” of a charge to tax (which she understood to mean a “high probability” that tax was due), we agree with Fluid Scotland that this would put the test too high, given that all that is required is for there to have been a “reasonable case” as to the liability to tax. That does not, however, mean that the decision should be quashed. The Tribunal’s discretion to order the relief sought by the claimants is constrained by the provisions of the Senior Courts Act 1981, which applies to these judicial review proceedings by virtue of s. 15(5) Tribunal Courts and Enforcement Act 2007. Section 31(2A) of that Act provides that the court:
“must refuse to grant relief on an application for judicial review… if it appears to the court to be highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred.”
[172]We are therefore required to consider whether it is highly likely that the decision would not have been substantially different if HMRC had not made the error in question: R (Bradbury) v Awdurdod Parc Cenedlaethol Bannau Brycheiniog (Brecon Beacons National Park Authority) [2025] EWCA Civ 489, §71. In this case, for the reasons set out above, we consider that Ms Robinson’s decision would undoubtedly have been precisely the same if she had applied the test of “reasonable case” rather than a “clear indication” of liability to tax.

Airedale: disclosure made

[173]The reasonable disclosure issue is relevant to Airedale in respect of the tax years 2011/12 (NICs of £142,501), 2012/13 (income tax of £230,294.91 and NICs of £101,140.36) and 2013/14 (income tax of £428,336.97). In respect of each of these, Airedale does not now rely on its company tax returns, but instead relies on disclosures made in the following standard format in the Self-Assessment tax returns of the relevant employee or director who was the beneficiary of the contribution in question, giving an example of the Self-Assessment tax return for Mr C J Chadwick for the tax year ended 5 April 2014:
“On 22 November 2011, the company established the Airedale Chemical Company Limited Employer Financed Retirement Benefit Scheme 2011. The company subsequently created a sub-trust for the benefit of me and various other employees. On 12 July 2013 an agreement was entered into which resulted in me owing a debt of GBP 50,004.00 to this sub-trust. Based on professional advice I have received it is my interpretation of the tax law that the above transaction does not constitute an employment-related loan as detailed in S175 ITEPA 2003, and therefore the terms of this debt do not give rise to a benefit in kind which is chargeable to tax on me in the period covered by this tax return. I acknowledge that my interpretation may be a variance with that of HM Revenue & Customs.”

HMRC’s decision

[174]Ms Fletcher’s reasoning in her review decision is set out above at §§51–52. She concluded that there was not reasonable disclosure, since the Self Assessment returns did not identify the loan and to whom it was made, the relevant arrangements, and whether income tax was due.[175]Ms Fletcher’s subsequent witness statement explained that she had looked at various company and individual tax returns, but had not considered any AAG forms as none had been referred to. As regards the Self Assessments which are now relied on by Airedale, and using the example set out above of Mr Chadwick’s return, she provided further detail of her reasons as follows:(1) The return stated that the company had established the named EFRBS but gave no further detail of that scheme and did not mention the SRN.(2) The return stated that the company subsequently created a sub-trust for the benefit of the individual and various other employees. There was no reference to a loan and thus no reference to individuals being loaned sums of money. Nor was there an explanation of whether the sub-trust was connected with the EFRBS or how, or where the money had come from.(3) The return stated that an agreement was entered into on 12 July 2013, but did not give details of the parties to that agreement or what its terms were.(4) The statement that the agreement “resulted in me owing a debt of GBP 500,000 to this sub-trust” was inadequate to indicate a loan between two entities. It did not say that the sub-trust loaned £500,000 to Mr Chadwick. Nor was a “debt” necessarily evidence of a loan, since there could be many reasons why an individual owed another a debt, such as payment for work done.(5) The return expressly stated that there was no employment-related loan under s. 175 ITEPA 2003 and thus no charge to tax.[176]Ms Fletcher exhibited and referred to the same internal HMRC operational note that we refer to at §136 above, relying particularly on the following guidance:
“It is not sufficient to identify that a loan or quasi loan was made, the disclosure also needs to identify the loan or quasi loan, e.g. who was the lender, what amount was loaned and when.” “The disclosure needs to clearly identify the person to whom the loan was made, a class of persons is not sufficient.” “To be reasonable disclosure, the relevant returns need to give enough information so we know how the arrangement works and we have a reasonable awareness that income tax is due on the loan or quasi loan as employment or trading income. It is not sufficient if a disclosure merely states that a loan or quasi loan is taxable as an employment related benefit without giving enough information for us to be aware that the loan or quasi loan is taxable as income.”

Application of the s. 20(5) conditions

[177]Subparagraphs (a) and (b) – the qualifying loan/quasi-loan and the recipient of the loan/quasi-loan. Again, it is convenient to take these conditions together. Mr Mullan relied on the definitions of a loan and quasi-loan to contend that the disclosure made in the Self Assessment tax returns of its directors and employees was sufficient to identify that a loan or quasi-loan had been made to those taxpayers.[178]We agree with Mr Mullan that, in considering the application of s. 20(5)(a), HMRC had to apply the definitions of a loan and quasi-loan set out in s. 20(8). That in turn referred back to §2 of Schedule 11 of the Finance (No. 2) Act 2017, the relevant provisions of which we have set out at §10 above. While Mr Stone pointed out that those definitions had only entered into force in 2017, which was after the time that the disclosure was first made and would have been looked at by HMRC, those were the definitions adopted by s. 20(8) for the purposes of the repayment scheme which was then implemented in the DRRS. We also agree with Mr Mullan that those definitions of loan and quasi-loan go beyond what might be thought of as a conventional loan.[179]We do not, however, consider that even on those broad definitions, the disclosure provided by the relevant taxpayers in the Self Assessment returns was sufficient to identify the existence of a loan or quasi-loan made to those taxpayers. While the information provided referred to the date of an agreement, and specified an amount of debt created by that agreement, the description of the agreement did not identify in any way the source of that debt. It certainly did not identify the existence of a loan, in the form of either some form of credit, or a payment purported to be made by way of a loan – in other words what the giver of “any form of credit” had provided. Indeed the comments stated expressly that there was not an employment-related loan for the purposes of s. 175 ITEPA 2003, nor any benefit in kind chargeable to tax. Nor did the information provided identify a quasi-loan: it did not refer to any right to payment or transfer of assets, in connection with a payment or loan or transfer of assets to the taxpayer.[180]All that was said, in very vague terms, was that the taxpayer owed a debt to a sub-trust pursuant to the relevant agreement. That was in our view manifestly insufficient to identify the existence of a loan or quasi-loan. Airedale’s submissions conspicuously did not specify whether what was disclosed was indeed to be analysed as a loan or a quasi-loan. If Airedale was unable to specify, precisely, whether what was disclosed was a loan or a quasi-loan, it cannot possibly be said that the disclosure identified one or the other of those arrangements so as to meet the test in s. 20(5)(a).[181]Subparagraphs (c) and (d) – loan arrangements and further information. The essence of Mr Mullan’s submission was that, particularly in light of HMRC’s background knowledge and position on EFRBS schemes, it was not necessary to set out the specific steps in the scheme in order for HMRC to make out a reasonable case that the relevant amounts of tax werepayable.[182]Mr Mullan’s skeleton argument contained a helpful summary of the various steps involved in the Airedale EFRBS scheme at issue in this claim, as follows:(1) The trustees of the EFRBS created sub-funds for the benefit of specified persons.(2) Airedale contributed a right to receive specified amounts (“£X”) to those sub-funds.(3) There was then a series of agreements entered into to create matching obligations between Airedale and its employees.(4) The first agreement was between Airedale, a third-party lender and the relevant employees. Airedale agreed to pay the lender £X (plus a fee); the lender undertook to pay £X to the employees; and the employees undertook to pay £X to Airedale.(5) Under the second agreement, Airedale procured to secure the agreement of the employees to release the lender from its obligations under the first agreement above in consideration of the lender agreeing to release Airedale from its obligations under that agreement. To achieve this Airedale agreed to pay the employees £X. That resulted in matching obligations whereby Airedale owed the employees £X and the employees owed Airedale £X. Under the terms of the agreements, however, these were independent obligations which could not however be set off against each other.(6) The third agreement was between Airedale, the EFRBS trustees and the relevant employees, and involved the employees procuring that the trustees undertook to pay Airedale £X. That was agreed to satisfy the obligation of the employees to pay the £X to Airedale, and it could be met by the right to receive £X settled on the EFRBS at the outset. To procure that the EFRBS trustees did this, the employees incurred a debt to the EFRBS trustees.(7) The outcome was that the employees had a debt to the EFRBS trustees of £X and Airedale had an obligation to pay £X to the employees which it did.[183]Mr Mullan’s submission was that HMRC did not need to know all of this detail, but merely needed to know enough for it to have a reasonable case that the scheme did not work as intended (i.e. that it did not in fact avoid the operation of Part 7A ITEPA 2003).[184]We do not accept that submission. We consider that the disclosure relied on was a plainly inadequate description of the arrangements. As we have set out above, to fulfil the requirements of s. 20(5)(c) and (d) there must (at least) be a description of the transactions and steps which give rise to the loan or quasi-loan, even if that is not set out in exhaustive detail. As a matter of language, the phrase “arrangements in pursuance of which … the loan or quasi-loan was made” contemplates a description of the steps taken, not simply the outcome of those steps. The disclosure relied upon by Airedale fails to set out any of the steps described by Mr Mullan, beyond the creation of a sub-trust for the benefit of various employees. The mere fact that EFRBS and sub-trusts were mentioned would plainly not be sufficient to make it apparent to HMRC that a reasonable case for a tax liability could be made. Even if it were assumed that those comments, together with the note that the view taken “may be a variance with that of HM Revenue & Customs” ought to have aroused suspicion so as to prompt further investigation, that (as discussed above) is not the relevant test.[185]Ms Fletcher’s decision on this point was therefore absolutely correct.

Conclusion

[186]We have concluded that HMRC was correct to refuse repayment in each of the review decisions in issue in the present claims. To the (very limited) extent that we have identified an error in the reasoning in relation to the decision for Fluid Scotland, we are satisfied that it is highly likely that the same outcome would be reached if that error had not been made. Accordingly, the relief sought by the claimants is refused. MRS JUSTICE BACON JUDGE SWAMI RAGHAVAN Release date: 15 August 2025

Cited in 2 later judgments