Delphi Derivatives Limited v The Commissioners for HMRC [2026] UKUT 00021 (TCC)

“(4) Paragraph 4 summarises the Scheme in the following terms: ‘The planning has the merit of simplicity and uses an exemption within the anti-avoidance rules which were brought in to counter the use of Employment Benefit Trusts (EBT’s). Whilst the direct use of an EBT by paying money into such an entity will not succeed in obtaining a Corporation Tax deduction, the use of the payment by way of sub-contracted services appears to circumvent the rules. This is the opinion of Andrew Thornhill a well respected QC at Pump Court Tax Chambers.’ … (7) Paragraph 7 is a cost-benefit analysis, pitching the costs of entering the Scheme against the anticipated tax savings: ‘The projections of tax saving based upon a profit of say £1,000,000 as prepared by Clavis do give a substantial tax saving of approximately 35% in year one but is should be noted that ongoing costs of £1500 to £2000 will be incurred per annum in each subtrust and will continue as long as the structure is required. Broadly this will be at least until the cessation of employment with the principal company and may be for 10 to 20 years or longer. I can explain the impact of that if required.’ … (9) Paragraph 9 identifies ‘possible areas of risk’ as follows: ‘There are a number of possible areas of risk: – 1) The possible introduction of retrospective legislation. 2) A possible attack on the principal shareholder under the Inheritance Tax legislation – I have seen that line of attack used on EBT’s in a way which has caused the breakdown of such arrangements. 3) The use of this scheme might be blocked at the time of the Pre-Budget report which may be in October 2008 if not sooner. This would mean that any planning would have to be implemented before then. I understand that total planning through these arrangements may be approaching £100,000,000. 4) Should the Corporation tax planning fail but the “income tax” side of the planning prove successful, the result would not be completely fatal but would make the savings only marginal. 5) The VAT status of a company using these arrangements is most important. The company must be able to fully recover all VAT as the payment made to the Human Resources company will be within the reverse charge mechanism.’ (10) Paragraph 10 recommended obtaining a second opinion: ‘My normal and usual advice for any such scheme would be to ask that another Counsel Opinion from a barrister other than the original one is obtained if the Promoters of the arrangements are prepared to permit this.’ (11) Paragraph 11 contains the caveat that the Scheme is open to challenge from HMRC: ‘Whilst the scheme seems to be most effective any aggressive tax planning will always be open to attack from HMRC and their current policy is to litigate everything. Enquiries have been raised into the computations of companies which have utilised these arrangements but I understand that HMRC are just at the collection of information stage.’ (12) Paragraph 12 relates the promoters’ agreement to fund the first stage of litigation: ‘The promoters undertake to fund the scheme to the first stage of any appeal process which would be to the new style Tax Tribunal form [sic] October 2008. If the tax payer won at the first stage, the promoters have not agreed to fund the matter to higher courts and the cost of such a case at the High Court or Court of Appeal is very expensive. If HMRC took the matter to the higher courts, that is a possible cost which you might have to bear. In other schemes, promoters have created a fighting fund which would allow the costs to be covered if the case went all the way through the appeal system.’ (13) Paragraph 13 assesses the chance of success in litigation and reiterates recommendation for advice from independent tax counsel: ‘This scheme appears to have a stronger chance of success than many more convoluted schemes but considering the amount you may wish to place in these arrangements I would recommend that the matter be put before independent Tax Counsel.’ (14) Paragraph 14 is the final paragraph with conclusions and a disclaimer: ‘I can not [original as two words] formally recommend such a scheme to you as there is certainly a risk in entering such arrangements. Should you wish to proceed having taken a commercial view, I would assist to try to ensure that the arrangements are properly implemented. Dickinsons will not be held responsible should you incur losses by entering into these arrangements.’” ‘My normal and usual advice for any such scheme would be to ask that another Counsel Opinion from a barrister other than the original one is obtained if the Promoters of the arrangements are prepared to permit this.’ ‘Whilst the scheme seems to be most effective any aggressive tax planning will always be open to attack from HMRC and their current policy is to litigate everything. Enquiries have been raised into the computations of companies which have utilised these arrangements but I understand that HMRC are just at the collection of information stage.’ ‘The promoters undertake to fund the scheme to the first stage of any appeal process which would be to the new style Tax Tribunal form [sic] October 2008. If the tax payer won at the first stage, the promoters have not agreed to fund the matter to higher courts and the cost of such a case at the High Court or Court of Appeal is very expensive. If HMRC took the matter to the higher courts, that is a possible cost which you might have to bear. In other schemes, promoters have created a fighting fund which would allow the costs to be covered if the case went all the way through the appeal system.’ ‘This scheme appears to have a stronger chance of success than many more convoluted schemes but considering the amount you may wish to place in these arrangements I would recommend that the matter be put before independent Tax Counsel.’ ‘I can not [original as two words] formally recommend such a scheme to you as there is certainly a risk in entering such arrangements. Should you wish to proceed having taken a commercial view, I would assist to try to ensure that the arrangements are properly implemented. Dickinsons will not be held responsible should you incur losses by entering into these arrangements.’”

“After Tucker’s review letter of 7 August 2008, there were further discussions between Tucker and Delphi’s directors and with representatives of Clavis. In terms of documentary records, the following events took place that led to Delphi’s entering the Scheme. Delphi used the Scheme in the years 2008-09 and 2009-10 by making four tranches of payments to Herald. (1) On 21 August 2008, Delphi’s board of directors held a meeting at which they agreed to set up an employment committee with responsibility for [Delphi]’s strategy for the establishment of an incentive, reward and retention arrangement for the benefit of its employees. On the same day, [Delphi] sent a letter to Herald asking for details of the services they provided to which Herald responded on 28 August 2008. (2) On 1 September 2008, [Delphi] entered into an outsourcing arrangement with Herald under which Herald agreed to provide certain services specified in Schedule 1 to that agreement, which included: (i) the evaluation of the duties of the employees specified by [Delphi]; (ii) conducting interviews with the employees and [Delphi]; (iii) production of a report to [Delphi] recommending the types of benefits to be provided and their approximate costs; (iv) a proposal for an overall fee which should cover the 16 benefits to be provided to the employees as well as Herald’s costs, and (v) the implementation of the agreed proposals.” (1) On 21 August 2008, Delphi’s board of directors held a meeting at which they agreed to set up an employment committee with responsibility for [Delphi]’s strategy for the establishment of an incentive, reward and retention arrangement for the benefit of its employees. On the same day, [Delphi] sent a letter to Herald asking for details of the services they provided to which Herald responded on 28 August 2008. (2) On 1 September 2008, [Delphi] entered into an outsourcing arrangement with Herald under which Herald agreed to provide certain services specified in Schedule 1 to that agreement, which included: (i) the evaluation of the duties of the employees specified by [Delphi]; (ii) conducting interviews with the employees and [Delphi]; (iii) production of a report to [Delphi] recommending the types of benefits to be provided and their approximate costs; (iv) a proposal for an overall fee which should cover the 16 benefits to be provided to the employees as well as Herald’s costs, and (v) the implementation of the agreed proposals.”

“Have spoken to Peter Tucker and he thinks we should do £5.4 million – I imagine this is ok with you?”

“(1) A penalty is payable by a person (P) where– (a) P gives HMRC a document of a kind listed in the Table below, and (b) Conditions 1 and 2 are satisfied. (2) Condition 1 is that the document contains an inaccuracy which amounts to, or leads to – (a) an understatement of a liability to tax, (b) a false or inflated statement of a loss, or (c) a false or inflated claim to repayment of tax. (3) Condition 2 is that the inaccuracy was careless (within the meaning of paragraph 3) or deliberate on P’s part.”

“(1) For the purposes of a penalty under paragraph 1, inaccuracy in a document given by P to HMRC is – (a) “careless” if the inaccuracy is due to failure by P to take reasonable care, (b) “deliberate but not concealed” if the inaccuracy is deliberate on P’s part but P does not make arrangements to conceal it, and (c) “deliberate and concealed” if the inaccuracy is deliberate on P’s part and P makes arrangements to conceal it (for example, by submitting false evidence in support of an inaccurate figure.”

“(1) P is liable under paragraph 1(1)(a) where a document which contains a careless inaccuracy (within the meaning of paragraph 3) is given to HMRC on P’s behalf. … (3) Despite subparagraphs (1) and (2), P is not liable to a penalty under paragraph 1 or 2 in respect of anything done or omitted by P’s agent where P satisfies HMRC that P took reasonable care to avoid inaccuracy (in relation to paragraph 1) or unreasonable failure (in relation to paragraph 2).”

“with an unambiguous lack of endorsement of the Scheme due to the certainty of a risk in it being found to have underdeclared its tax liabilities.”

“231. The substance of Tucker’s advice and his conclusion demands a response from a prudent and reasonable taxpayer intent on meeting its obligations to render correct returns to account for its tax liabilities – but [Delphi] did nothing in response whatsoever. It is in this regard that we conclude that [Delphi] fell short of the standard of being a prudent and reasonable taxpayer by taking no action to address the possible areas of risk raised in Tucker’s letter in order to enable itself to meet the obligations in rendering accurate and complete returns to account for all its tax liabilities. 232. Whilst one obvious action to take by a prudent and reasonable taxpayer on receiving Tucker’s advice would be to obtain independent counsel’s opinion as recommended, that was by no means the only response open to Delphi on receiving Tucker’s advice. For the avoidance of doubt, we conclude that [Delphi] had failed to take reasonable care to avoid inaccuracy not because it did not obtain independent counsel’s opinion per se, but because it took no action whatsoever to address the certainty of a risk (namely the Scheme failing and tax liabilities owing) that was cogently explained and plainly stated in the advice letter of 7 August 2008. 233. On one interpretation, and by reference to Tucker’s understanding of his instruction in terms as stated to Cowen in the phone call, that was ‘to review the way [Clavis/Herald] put the scheme together’, Tucker’s remit might have been more focused on the logistics of how monies were supposed to flow through the Scheme to find their way home to the directors eventually, and on the legality of each implementing steps of the Scheme (including exit on cessation of employment) than on the critical concern in this appeal – that is to say, whether Delphi would be meeting its taxpayer’s obligations in rendering complete and accurate returns to account for its tax liabilities by entering into the Scheme. 234. The interpretation that the critical concern in this appeal was not uppermost in the directors’ minds when instructing Tucker is consistent with the fact that there was no action taken in response to the substantive advice on the areas of risk that would have direct bearing on Delphi’s obligations as a taxpayer to render accurate and complete returns. This interpretation is also consistent with the part of Tucker’s conclusion in the advice letter where he referred to the alternative of the directors wishing to proceed ‘having taken a commercial view’. Taking a commercial view as the premise for proceeding has the implication of setting aside the critical concern that was inherent in ‘there is certainly a risk’ in the immediately preceding sentence. Taking a commercial view in terms of the supposed cost-benefit analysis from avoiding taxes over and above the critical concern as a taxpayer to render complete and accurate returns is a failure to take reasonable care to avoid inaccuracy for Sch 24 purposes.”

“235. The penalties are pursuant to para 1 Sch 24, and para 3(1)(a) defines an inaccuracy as ‘careless’ ‘if the inaccuracy is due to failure by P [i.e. the taxpayer] In a footnote the FTT recorded that: “‘P’ is defined under para 1(1)(a) of Sch 24 as the person who ‘gives HMRC a document of a kind listed in the Table below’, and for present purposes, P being the taxpayer shall suffice.” to take reasonable care’. The causative link, as we understand it, is derived from the statutory wording of ‘due to’, which means (per Oxford English Dictionary): ‘attributable to, ascribable to’ (as an adjectival phrase) or ‘because of, on account of, owing to’ (as a prepositional phrase). 236. We conclude that there was a failure to take reasonable care on the part of [Delphi] for Sch 24 purposes, and that the inaccuracies in the P35 returns were attributable to [Delphi]’s failure to take reasonable care in terms as discussed above. We conclude therefore that HMRC have met the burden of proof that there was a failure on [Delphi]’s part to take reasonable care under the terms of para 3(1)(a) of Sch 24 for a careless penalty to be imposable on all tranches.”

“We repeatedly sought the advice of Dickinsons” and “…more importantly, the company was filing its returns on the correct and accurate basis”, and [were] relying on Dickinsons to get it right.”

“I had, at the behest of the company, invested significant time and understanding the Arrangement to ensure that it was technically robust and that the paperwork supported the intended outcome of the planning.”

“…the instructions from the client were to review the Clavis arrangements and let them know whether the arrangements were effective and I prepared this [advice] letter having reviewed the details of the Scheme and the arrangements.”

“I was looking at the Corporation Tax savings and also the amount that the directors might expect to get if they utilised the arrangements. So I was also comparing against taking profits out by way of dividends, by way of remuneration or by use of these arrangements.”

“it looks that it was an effective arrangement, if any tax planning of that nature could ever be said to be a sound arrangement.”

“that it was Tucker’s view that ‘any aggressive tax planning will always be open to attack from HMRC’ – the adverb ‘always’ conveyed certainty of HMRC’s challenge on the Scheme that a prudent and reasonable taxpayer would have taken further action to ascertain the tax savings purported to be delivered by the Scheme would be supported by another counsel’s opinion.”

“we accept that Delphi took reasonable care to ascertain the legality of the Clavis Arrangement before entering into the Scheme, but that in itself does not prove that [Delphi] took reasonable care to avoid inaccuracy in terms as required under para 18(3) Sch 34.”

“The planning has the merit of simplicity and uses an exemption within the anti-avoidance rules which were brought in to counter the use of Employment Benefit Trusts (EBT's). Whilst the direct use of an EBT by paying money into such an entity will not succeed in obtaining a Corporation Tax deduction, the use of the payment by way of subcontracted services appears to circumvent the rules. This is the opinion of Andrew Thornhill a well-respected QC at Pump Court Tax Chambers.” of Mr Tucker’s witness statement was evidence that he was instructed to ensure that the Scheme was “technically robust” and the “paperwork supported the intended outcome”

“11. There are numerous authoritative statements of the precise meaning of the concept that a finding of fact involves an error of law when it is based upon non-existent or inadequate evidence. They were very recently summarised by Christopher Clarke J in Red 12 Trading Ltd v HMRC [2009] EWHC 2563 (Ch) at paragraphs 113-120. The question is not whether the finding was right or wrong, whether it was against the weight of the evidence, or whether the appeal court would itself have come to a different view. An error of law may be disclosed by a finding based upon no evidence at all, a finding which, on the evidence, is not capable of being rationally or reasonably justified, a finding which is contradicted by all the evidence, or an inference which is not capable of being reasonably drawn from the findings of primary fact. As Lord Radcliffe put it in Edwards v Bairstow [1956] AC 14, at 39: “Their duty is no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado…”

“The construction of ‘due to’ in para 3(1) 164. The question we direct ourselves to address is whether there is any basis for construing the statutory condition under para 3(1) Sch 24 as requiring a proof of causation. The statutory phrase ‘due to’ arguably may have given rise to the notion of causation. The relevant dictionary meaning to be given to ‘due to’ in para 3(1) is ‘attributable to, ascribable to’ (as an adjectival phrase) or ‘because of, on account of, owing to’ (as a prepositional phrase). 165. The change in the statutory wording referred to earlier in relation to sub-s 29(4) TMA, where the wording ‘attributable to fraudulent or negligent conduct’ became ‘brought about carelessly or deliberately by’, was part of a number of changes stated in explanatory notes issued in 2008 with the draft amendments to s29 TMA. The explanatory notes referred to the amendments of s 29 TMA as being made to align with the terms used in the new penalty regime under Sch 24 FA 2007, ‘as part of introducing a more uniform penalty regime across different taxes’: Alan Anderson Alan Anderson v HMRC [2016] UKFTT 335 at [118]. In the discovery assessment context of sub-s 29(4), the wording of ‘attributable to’ and ‘brought about’ between the insufficiency of tax discovered and the behaviour of the taxpayer similarly connotates [sic] with ‘due to’ in para 3(1) of Sch 24. 166. We are of the view that the nexus required to be established at para 3(1) is one of attribution – in the sense that the inaccuracy can be accounted for by a mode of behaviour which is characterised as ‘failure to take reasonable care’. Attribution in the sense of because of, on account of, or owing to connotes the sense that the inaccuracy in question being accountable by, or explained by a failure to take reasonable care. In our judgment, ‘due to’ in para 3(1) of Sch 24 does not equate to the kind of nexus of causation apposite to tort liability. 167. Blyth Blyth v Birmingham Waterworks Co [1856] 11 Ex 781 was a case on tort liability. To establish liability in tort, it is necessary to prove the chain of causation whereby a duty of care existed between the parties, there was a breach of that duty (by omission or commission of a certain action), and that breach of duty is the proximate cause of the damage or injury sustained. The most important element of proof is the casual link between the breach and the injury, and causation in tort is often cast in terms of ‘but for’ the defendant’s actions/omissions, the plaintiff’s injury would not have occurred. 168. The ‘but for’ type of causation in tort requires specificity in order to establish the breach of a particular duty of care is the cause of injury. Specificity for each element of proof requires the pinpointing of an action or omission to establish the breach, and that it is a specific breach that is the immediate cause of the injury. Each element of proof in tort is primarily objective, and the causal link required to be established for each element needs to be tight to prove proximity whereby the breach in question is the immediate cause of the injury in question. 169. Unlike the proof of breach in tort, which is an objective test, the characterisation of the mode of behaviour under the description of ‘failure to take reasonable care’ is an objective test, and at the same time, takes into account the subjective attributes of the taxpayer in question. Unlike the pinpointing of an action or omission to establish a breach in tort, the characterisation of a mode of behaviour for para 3(1) purposes is a broader consideration than the mere focus on a specific action or a particular omission. 170. The taxpayer’s defence under para 18(3) is in a generic sense of: ‘took reasonable care to avoid inaccuracy’. The absence of the definite article in ‘avoid inaccuracy’ is conspicuous, and connotates [sic] the generality of a mode of behaviour, rather than the specificity of a particular action or omission. The absence of the definite article in para 18(3) defence points to the construction that the nexus between inaccuracy and behaviour applicable to Sch 24 FA 2007 is not one of causation in the ‘but for’ sense, which requires the pinpointing of an action or omission to be particularised in order to establish the ‘but for’ causation. 171. For these reasons, we do not find it appropriate to import the concept of causation apposite to the law of tort to construe the statutory wording ‘due to’ at para 3(1). We reject the notion that ‘due to’ in para 3(1) which introduces the nexus between the inaccuracy in question and the taxpayer’s behaviour connotates [sic] causation in the ‘but for’ sense required in tort.” (Emphasis added)

“230. The question for the Tribunal is what a prudent and reasonable taxpayer – intent on fulfilling its obligations to render accurate returns to account for all its tax liabilities – would have done when faced with such advice as given by Tucker by letter dated 7 August 2008 which concluded with an unambiguous lack of endorsement of the Scheme due to the certainty of a risk in being found to have underdeclared its tax liabilities. 231. The substance of Tucker’s advice and his conclusion demands a response from a prudent and reasonable taxpayer intent on meeting its obligations to render correct returns to account for its tax liabilities – but [Delphi] did nothing in response whatsoever. It is in this regard that we conclude that [Delphi] fell short of the standard of being a prudent and reasonable taxpayer by taking no action to address the possible areas of risk raised in Tucker’s letter in order to enable itself to meet the obligations in rendering accurate and complete returns to account for all its tax liabilities. 232. Whilst one obvious action to take by a prudent and reasonable taxpayer on receiving Tucker’s advice would be to obtain independent counsel’s opinion as recommended, that was by no means the only response open to Delphi on receiving Tucker’s advice. For the avoidance of doubt, we conclude that [Delphi] had failed to take reasonable care to avoid inaccuracy not because it did not obtain independent counsel’s opinion per se, but because it took no action whatsoever to address the certainty of a risk (namely the Scheme failing and tax liabilities owing) that was cogently explained and plainly stated in the advice letter of 7 August 2008. 233. On one interpretation, and by reference to Tucker’s understanding of his instruction in terms as stated to Cowen in the phone call, that was ‘to review the way [Clavis/Herald] put the scheme together’, Tucker’s remit might have been more focused on the logistics of how monies were supposed to flow through the Scheme to find their way home to the directors eventually, and on the legality of each implementing steps of the Scheme (including exit on cessation of employment) than on the critical concern in this appeal – that is to say, whether Delphi would be meeting its taxpayer’s obligations in rendering complete and accurate returns to account for its tax liabilities by entering into the Scheme. 234. The interpretation that the critical concern in this appeal was not uppermost in the directors’ minds when instructing Tucker is consistent with the fact that there was no action taken in response to the substantive advice on the areas of risk that would have direct bearing on Delphi’s obligations as a taxpayer to render accurate and complete returns. This interpretation is also consistent with the part of Tucker’s conclusion in the advice letter where he referred to the alternative of the directors wishing to proceed ‘having taken a commercial view’. Taking a commercial view as the premise for proceeding has the implication of setting aside the critical concern that was inherent in ‘there is certainly a risk’ in the immediately preceding sentence. Taking a commercial view in terms of the supposed cost-benefit analysis from avoiding taxes over and above the critical concern as a taxpayer to render complete and accurate returns is a failure to take reasonable care to avoid inaccuracy for Sch 24 purposes. 235. The penalties are pursuant to para 1 Sch 24, and para 3(1)(a) defines an inaccuracy as ‘careless’ ‘if the inaccuracy is due to failure by P [i.e. the taxpayer]23 to take reasonable care’. The causative link, as we understand it, is derived from the statutory wording of ‘due to’, which means (per Oxford English Dictionary): ‘attributable to, ascribable to’ (as an adjectival phrase) or ‘because of, on account of, owing to’ (as a prepositional phrase). 236. We conclude that there was a failure to take reasonable care on the part of [Delphi] for Sch 24 purposes, and that the inaccuracies in the P35 returns were attributable to [Delphi]’s failure to take reasonable care in terms as discussed above. We conclude therefore that HMRC have met the burden of proof that there was a failure on [Delphi]’s part to take reasonable care under the terms of para 3(1)(a) of Sch 24 for a careless penalty to be imposable on all tranches.”

“clearly understood that sections 36(1) and 118(5) require a causal link between carelessness of the taxpayer and the loss of tax. In the relevant paragraphs, the F-tT quoted the statutory words four times, and used various synonyms, including 'cause' (and cognate words), 'as a result of', and 'led directly to'.”

“On the F-tT's findings, it is obvious that had Mainpay taken reasonable care, the contracts would have been overarching contracts of employment. If they had been overarching contracts, the reimbursement of those expenses would not have been liable to tax (subject to the issue raised by ground 2). Mainpay did not take reasonable care to ensure that the contracts were overarching contracts. Mainpay nevertheless reimbursed the expenses free of tax, as if the contracts were overarching contracts, when, in law, those payments were liable to tax. Had Mainpay taken reasonable care, therefore, on the F-tT's findings, that loss of tax would have been avoided.” (Emphasis added by Mr Sherry)

“We are of the view that the nexus required to be established at para 3(1) is one of attribution – in the sense that the inaccuracy can be accounted for by a mode of behaviour which is characterised as ‘failure to take reasonable care’.”

“The absence of the definite article in ‘avoid inaccuracy’ is conspicuous, and connotates [sic] the generality of a mode of behaviour, rather than the specificity of a particular action or omission. The absence of the definite article in para 18(3) defence points to the construction that the nexus between inaccuracy and behaviour applicable to Sch 24 FA 2007 is not one of causation in the ‘but for’ sense, which requires the pinpointing of an action or omission to be particularised in order to establish the ‘but for’ causation.”

“[114] …F-tT clearly understood that sections 36(1) and 118(5) require a causal link between carelessness of the taxpayer and the loss of tax. In the relevant paragraphs, the F-tT quoted the statutory words four times, and used various synonyms, including 'cause' (and cognate words), 'as a result of', and 'led directly to'.” [115] …On the contrary, the F-tT did apply a causal test. Its conclusion was that it was 'clear that the failure to take reasonable care to ensure that the contract in question was an overarching contract of employment led directly to the loss of tax as a result of Mainpay treating the expenses as deductible when in the absence of an overarching contract, they were not'…”

“The loss of tax in this case was that part of the workers’ pay was treated as tax-free when it should have been subject to the deduction of tax. On the F-tT’s findings, it is obvious that had Mainpay taken reasonable care, the contracts would have been overarching contracts of employment. If they had been overarching contracts, the reimbursement of those expenses would not have been liable to tax (subject to the issue raised by ground 2). Mainpay did not take reasonable care to ensure that the contracts were overarching contracts. Mainpay nevertheless reimbursed the expenses free of tax, as if the contracts were overarching contracts, when, in law, those payments were liable to tax. Had Mainpay taken reasonable care, therefore, on the F-tT’s findings, that loss of tax would have been avoided.”

“110. Officer Barraclough was extensively cross-examined on the state of authorities in relation to contributions made to an EBT during the tax year 2008-09, and he accepted or agreed that: (1) The main objective of the Arrangement was to enable a contribution into an EBT to get a Corporation Tax deduction. (2) If there was a contribution to an EBT and a loan from the EBT to employees, the state of authorities meant that ‘there would be no PAYE and NIC at that time’. (3) The outcome in Dextra where the company sought a tax deduction as well, Barraclough accepted, at least in part, that taxpayers could rely on Dextra. (4) The mischief which the Revenue would be hoping to cure was to work round Dextra, and the Scheme was trying to circumvent the effect of the decision of the House of Lords in Dextra ‘to allow for a CT deduction taken immediately’. (5) The arrangements in the present case were different to a ‘standard EBT’, but he could not explain why if in an ordinary standard EBT, it was permissible not to operate PAYE and NIC, that in the present case, PAYE and NIC needed to be operated. (6) Sempra had been decided in 2008 and the view was that with regard to the PAYE element, the Revenue had not succeeded at that point in time in the way it had in Rangers. (7) It was ‘not clear that the writing was on the wall for Rangers’ because the Court of Session judgment was not until November of 2015.” [Emphasis added]

“170. The taxpayer’s defence under para 18(3) is in a generic sense of: ‘took reasonable care to avoid inaccuracy’. The absence of the definite article in ‘avoid inaccuracy’ is conspicuous, and connotates the generality of a mode of behaviour, rather than the specificity of a particular action or omission. The absence of the definite article in para 18(3) defence points to the construction that the nexus between inaccuracy and behaviour applicable to Sch 24 FA 2007 is not one of causation in the ‘but for’ sense, which requires the pinpointing of an action or omission to be particularised in order to establish the ‘but for’ causation.”

“241. We conclude that [Delphi] has not proved, on the balance of probabilities, that it took reasonable care to avoid inaccuracy (in the sense of being intent that the returns it rendered to HMRC to account for its tax liabilities would be complete and accurate) to avail itself of the defence under para 18(3) Sch 24.” (Emphasis added by Mr Bignell)

“The fourth tranche – November/December 2009 55. The evaluation report for the fourth and final tranche was produced on 27 October 2009. The correspondence in the run-up to 27 October 2009 in the bundle shows the following: (1) On 17 September 2009, Officer Walker received a telephone call from Sally Fuller of Clavis Solutions (Clavis Solutions being the ‘tax advisers to Herald Resource’) in response to Walker’s letter of 15 September 2009. The note of the call (by Walker) recorded the following: ‘Fuller explained that she had spoken to Dave Jones at SI Liverpool regarding Walker’s letter as Jones was overseeing a review of the remuneration scheme provided by Clavis Solutions which had been used by several other companies including Delphi Derivatives. Fuller said that she would confirm the details in writing to Walker and provide a “bible” of documents regarding use of the remuneration arrangement.’ (2) On 21 October 2009, Dickinsons responded to HMRC’s letter of 15 September 2009 under the heading ‘Check of CTSA Tax Return for Delphi Derivatives Limited/ Period ended 30th June 2008’. The letter opened by referring to Officer Walker’s ‘recent discussion’ with Sally Fuller of Clavis Solutions, and enclosed ‘a complete bible of documents’ said to support ‘the key employee reward and incentivisation arrangement undertaken’ by Delphi in the accounting period ended 30 June 2008, together with the correspondence and minutes contained in the ‘bible’. Dickinsons’ letter also refers specifically to being aware of HMC’s enquiries into other scheme users: ‘We understand that you [i.e. Officer Walker] have agreed to liaise directly with Mr David Jones from Specialist Investigations in Liverpool who is coordinating all enquiries into this arrangement.’ (3) On 22 October 2009, Sally Fuller emailed Kerry Hall (and two others) at Clavis Solutions under the subject heading of ‘Delphi Derivates new sign up pack for SPT4’: ‘Can one of you please produce Delphi Derivates new sign up pack for SPT4? David [Cowen] going down to London next Tuesday for sign up, so he’ll need it ready before then. They’re doing £3m and will relate to their year ended 30 June 2009.’ 56. The ‘sign-up pack for SPT4’ in Sally Fuller’s email was a reference to the evaluation report to be produced after the scheduled meeting on 27 October 2009 when Cowen would have met with Delphi’s directors to carry out the ‘services’ to be performed by HES. The sign up pack SPT4 version was completed with a recommendation of a bonus of £1m gross per director with an invoice total of £3m. 57. The final report with the cover title being: ‘Company Information Sheets and Employee Performance Evaluation Sheets prepared by Herald Employment and Recruitment Services 18 Limited’ changed the recommended budget amount from the initial of £3m to £5.4m. The significant dates of events leading to the amendment in the budgeted amount are as follows: (1) On 27 October 2009, David Cowen for HES met with [Delphi]’s directors. (2) The employee evaluation documents supposedly completed on 27 October 2009 stated the recommended budget to be £3m. (3) On 31 October 2009, Langran’s short email to Cowen stated in full as follows: ‘Have spoken to Peter Tucker and he thinks we should do £5.4m – I imagine this is ok with you?!’ (4) Herald’s report produced on 19 November 2009 recommended a budget of £5.4m. 58. The following correspondence (after Cowen’s meeting of 27 October 2009) gives some indication as to the circumstances surrounding the implementation of tranche 4 due to cashflow issues faced by Delphi at the time. While there was this amendment by Herald of the initial £3m to £5.4m, Delphi was unable to pay the invoice total of £5.4m in one go. A ‘loan back’ arrangement was made between Delphi and Herald Trustees, whereby the first instalment was loaned back to the directors to fund the payment of the second instalment of the invoice. (1) A letter dated 16 November 2009 by Herald Employment Services LLP (HES in Cheshire) to Christina Kiely of Herald Resource (in Jersey) regarding Delphi, states: ‘Following our meeting with the above clients we are pleased to set out our findings for your consideration:- On the basis of the company and employee evaluations we have carried out, our preliminary view is that an overall benefit and incentive budget of approximately £5,000,000.00 to £5,500,000.00 should be able to provide a sufficient level of benefits and incentives to motivate, reward and retain the employees.’ (2) By email dated 20 November from Langran to Pauline Egan of Herald Trustees: ‘As discussed please could you send me the necessary paperwork for me to borrow £200,000 from the trust on an interest paying basis (which I think means we have to do slightly more so that I have enough money left in my […] Jersey account to pay the interest when it becomes due).’ (3) By email dated 23 November 2009 from Langran to Cowen: ‘I have paid £2.7mln to Herald today – then I need to arrange for the three of us to borrow it back so we can pay the balance of the invoice. Please could you ask whoever does the paperwork to organise the loan documents for us – we will need to do a loan of £900,000 each as cash flow a bit of an issue at the moment.’ 59. Following the discussion of the ‘loan-back’ arrangement by Langran’s email of 23 November 2009, the steps in terms of payment to implement tranche 4 took place as follows. (1) On 23 November 2009, Langran emailed Cowen that the invoice would need to be paid in two instalments with the first instalment being loaned back to the directors. (2) On 23 November 2009, [Delphi] paid £2.7m to Herald. (3) On 24 November 2009, £2,522,429 was settled into Delphi’s EBT. (4) On 25 November 2009, the settled amount was allocated into the sub-trusts. (5) On 3 December 2009, [Delphi] paid the second instalment of £2.7m to Herald. (6) On 4 December 2009, the sum of £2,523,364 (net of fees deducted by Herald) was settled into Delphi’s EBT. (7) On 7 December 2009, amounts were allocated to the sub-trusts.” (1) On 17 September 2009, Officer Walker received a telephone call from Sally Fuller of Clavis Solutions (Clavis Solutions being the ‘tax advisers to Herald Resource’) in response to Walker’s letter of 15 September 2009. The note of the call (by Walker) recorded the following: ‘Fuller explained that she had spoken to Dave Jones at SI Liverpool regarding Walker’s letter as Jones was overseeing a review of the remuneration scheme provided by Clavis Solutions which had been used by several other companies including Delphi Derivatives. Fuller said that she would confirm the details in writing to Walker and provide a “bible” of documents regarding use of the remuneration arrangement.’ (2) On 21 October 2009, Dickinsons responded to HMRC’s letter of 15 September 2009 under the heading ‘Check of CTSA Tax Return for Delphi Derivatives Limited/ Period ended 30th June 2008’. The letter opened by referring to Officer Walker’s ‘recent discussion’ with Sally Fuller of Clavis Solutions, and enclosed ‘a complete bible of documents’ said to support ‘the key employee reward and incentivisation arrangement undertaken’ by Delphi in the accounting period ended 30 June 2008, together with the correspondence and minutes contained in the ‘bible’. Dickinsons’ letter also refers specifically to being aware of HMC’s enquiries into other scheme users: ‘We understand that you [i.e. Officer Walker] have agreed to liaise directly with Mr David Jones from Specialist Investigations in Liverpool who is coordinating all enquiries into this arrangement.’ (3) On 22 October 2009, Sally Fuller emailed Kerry Hall (and two others) at Clavis Solutions under the subject heading of ‘Delphi Derivates new sign up pack for SPT4’: ‘Can one of you please produce Delphi Derivates new sign up pack for SPT4? David [Cowen] going down to London next Tuesday for sign up, so he’ll need it ready before then. They’re doing £3m and will relate to their year ended 30 June 2009.’ (1) On 27 October 2009, David Cowen for HES met with [Delphi]’s directors. (2) The employee evaluation documents supposedly completed on 27 October 2009 stated the recommended budget to be £3m. (3) On 31 October 2009, Langran’s short email to Cowen stated in full as follows: ‘Have spoken to Peter Tucker and he thinks we should do £5.4m – I imagine this is ok with you?!’ (4) Herald’s report produced on 19 November 2009 recommended a budget of £5.4m. (1) A letter dated 16 November 2009 by Herald Employment Services LLP (HES in Cheshire) to Christina Kiely of Herald Resource (in Jersey) regarding Delphi, states: ‘Following our meeting with the above clients we are pleased to set out our findings for your consideration:- On the basis of the company and employee evaluations we have carried out, our preliminary view is that an overall benefit and incentive budget of approximately £5,000,000.00 to £5,500,000.00 should be able to provide a sufficient level of benefits and incentives to motivate, reward and retain the employees.’ (2) By email dated 20 November from Langran to Pauline Egan of Herald Trustees: ‘As discussed please could you send me the necessary paperwork for me to borrow £200,000 from the trust on an interest paying basis (which I think means we have to do slightly more so that I have enough money left in my […] Jersey account to pay the interest when it becomes due).’ (3) By email dated 23 November 2009 from Langran to Cowen: ‘I have paid £2.7mln to Herald today – then I need to arrange for the three of us to borrow it back so we can pay the balance of the invoice. Please could you ask whoever does the paperwork to organise the loan documents for us – we will need to do a loan of £900,000 each as cash flow a bit of an issue at the moment.’ (1) On 23 November 2009, Langran emailed Cowen that the invoice would need to be paid in two instalments with the first instalment being loaned back to the directors. (2) On 23 November 2009, [Delphi] paid £2.7m to Herald. (3) On 24 November 2009, £2,522,429 was settled into Delphi’s EBT. (4) On 25 November 2009, the settled amount was allocated into the sub-trusts. (5) On 3 December 2009, [Delphi] paid the second instalment of £2.7m to Herald. (6) On 4 December 2009, the sum of £2,523,364 (net of fees deducted by Herald) was settled into Delphi’s EBT. (7) On 7 December 2009, amounts were allocated to the sub-trusts.”

“[63] In our view, a deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. This is a subjective test. The question is not whether a reasonable taxpayer might have made the same error or even whether this taxpayer failed to take all reasonable steps to ensure that the return was accurate. It is a question of the knowledge and intention of the particular taxpayer at the time.”

“Findings of fact regarding tranche 4 258. With the case law definition for deliberate action in mind, we have regard to the sequence of events and the evidence of Tucker and Langran in relation to tranche 4. (1) The enquiry into the CT return for the accounting period ended 30 June 2008 was opened on 15 September 2009, and was a fact firmly in the background at the time when [Delphi] embarked on implementing tranche 4. (2) In fact, the conjunction of events meant that Clavis Solutions (as ‘tax advisers to Herald Resource) was responding to Officer Walker’s request in connection with the enquiry into Delphi by way of Sally Fuller’s telephone call to Walker, while at the same time preparing for tranche 4 to be implemented – Fuller’s call to Walker on 21 October 2009 was followed the next day by her email instruction for the sign up pack for SPT4 to be produced. (3) [Dickinsons] as Delphi’s advisers, would appear to have been updated by Fuller, as inferred from the opening paragraphs in their letter of 21 October 2009, and Dickinsons by making direct reference to Officer Jones of SI Liverpool co-ordinating the enquiries into other users of the Clavis Arrangement, was fully aware of the scale of investigation. (4) Around the time of tranche 4 being discussed, HMRC’s Spotlight 5 HMRC’s publication entitled Spotlights (published on 5 August 2009 and archived 2 November 2009) set out HMRC’s views on that tax position in respect of arrangements similar to those entered into by Delphi, saying that HMRC's view was that funds allocated to an employee or his/her beneficiaries were liable to PAYE and NICs: “Our view is that at the time the funds are allocated to the employee or his/her beneficiaries, those funds become earnings on which PAYE and NICs are due and should be accounted for by the employer.” would have been in circulation since 5 August 2005, and its archived date was 2 November 2009. (5) Cowen of Herald/Clavis supposedly had prepared an evaluation report dated 27 October 2009 following his attendance at Delphi’s premises on the same date, which recommended rewards of £1m for each of the directors. However, Sally Fuller’s email of 22 October 2009 (which pre-dated Cowen’s visit of 27 October 2009) was to instruct her colleagues to produce ‘new sign up pack for SPT4’ where she clearly stated to her colleagues: ‘They’re doing £3m and will relate to their year ended 30 June 2009’. (6) The reasonable inference, from Sally Fuller’s instruction email of 22 October 2009, that the figure of £3m was already determined before Cowen’s visit of 27 October 2009 purportedly to carry out an independent review. (7) Furthermore, the figure per Sally Fuller’s email of 22 October 2009 would appear to be referable to Delphi’s cash position at the time of tranche 4, being £3m (or £2.7m), according to Langran’s evidence. (8) When Sally Fuller told her colleague ‘They’re doing £3m’ (before Cowen’s visit), the most probable inference of the identity of ‘they’ would be ‘the directors of Delphi’. (9) Tucker’s evidence was that the tranche 4 payment was made post-year-end, and included in the final set of accounts by way of an accrual. (10) The reasonable inference is that the management accounts provided to Cowen by email on 30 October 2009 would not have included the £5.4m. (11) Between the management accounts on 30 October 2009 and the set of accounts filed on 9 June 2010, an accrual of £5.4m augmented the figure for Directors’ emoluments to £11m, (inclusive of the £5.4m invoice paid to Herald), which represents 86% of the ‘Administrative expense’ total of £12.78m for period ended 30 June 2009. (12) Tucker’s evidence originally stated that the management accounts would not have changed Herald’s recommendation, then changed to state that Herald would not have changed the figure without supporting documents, such as the management accounts. (13) Langran’s evidence concurred with Tucker’s amended evidence, in that the change of recommendation in Herald’s report from £3m to £5.4m was due to the set of accounts sent on 30 October 2009. (14) Langran’s statement in cross-examination was that the email of 31 October 2009 was ‘to instruct’ Cowen of the ‘available profits’ from accounting period ended 30 June 2009 because Cowen had ‘no idea about [the company’s profits]’. (15) Between the email of 31 October 2009 and Herald Employment (Cheshire) informing Herald Resource (Jersey) on 16 November 2009 of the increased amount of remuneration budget, the reasonable inference is that the loan-back arrangements had been agreed to take place for the recommended sum to change from £3m to £5.4m. (16) Langran’s email to Cowen of 23 November 2009 was to signal to Cowen to arrange for the first instalment payment of tranche 4 to be loaned back to the directors to meet the second instalment payment of the tranche 4 invoice. 259. We make the following findings of fact for determining the behaviour for tranche 4. (1) We find that the original recommendation of £3m was by reference to Delphi’s cash position at the time, and the figure of £3m was in correspondence to instruct Herald/Clavis for the purpose of producing the ‘sign up pack for SPT4’ as related in Sally Fuller’s email instruction to her colleagues of 22 October 2009. (2) We find that the figure of £3m had emanated from the directors of Delphi and was determined before Cowen’s supposed review carried out on 27 October 2009. (3) Herald revised the recommended figure to £5.4m on being ‘instructed’ by Delphi (via Langran’s email of 31 October 2009) of its ‘available profit’. (4) We accept Langran’s evidence that Cowen had ‘no idea’ of Delphi’s ‘available profits’ without being so instructed. (5) Langran, in turn, was advised by Tucker, who would have known from the draft set of accounts that Delphi’s taxable profits stood at around £6.5m without any EBT payment invoice. (6) The circular loan back arrangements were devised to get round the net funds position at year end 2009, standing at just over £2m (cash plus investments), which was very far short of the £5.4m required to reduce operating profit to £1m. (7) The original recommendation of £3m referable to Delphi’s cash position would have taken into account of what Langran referred to as cash inflow after June 2009. (8) Without the loan back arrangements, Delphi would only have the cash to make £2.7m (or £3m) and would have to pay Corporation Tax on circa £3.5m instead of £1m. (9) We find that Langran’s evidence (a) that ‘[t]he suggestion never came from Mr Cowen “we should do £5.4 million”, because ‘Cowen had no idea about that’, and (b) ‘We had to instruct him’ – to be a truthful representation of what actually happened. To that extent, we find that the final EBT payment £5.4m was attributable to a deliberate action of [Delphi]. (10) We also find that the contrivance of the loan-back arrangements of the first instalment of £2.7m for the sole purpose of providing funds for [Delphi] to pay the second instalment of tranche 4, in order to double the overall CT deduction to £5.4m to be a deliberate action.”

“Conclusion on tranche 4 260. We find that the inaccuracy in relation to tranche 4 was attributable to deliberate action. We have regard to the fact that the test for ‘deliberate’ inaccuracy is a subjective one, and that we are concerned here with the knowledge and intention of [Delphi] specifically. 261. We find that the original sum of £3m for the purpose of producing the sign up pack to be an instruction emanating from the directors of Delphi and given to Herald/Clavis by 22 October 2009, at least about a week before the remuneration evaluation meeting of 27 October 2009. We conclude that the remuneration evaluation meeting was to give the ‘veneer’ of an independent review having been carried out, when the figures of remuneration budget were by instruction of Delphi’s directors all along, whether it was the original £3m or the revised £5.4m. 262. Depending on the precise circumstances, an inaccuracy may also be held to be deliberate where it is found that the person consciously or intentionally chose not to find out the correct position, in particular, where the circumstances are such that the person knew that he should do so. We have special regard to the fact that Dickinsons, as advisers to Delphi, was in correspondence with HMRC in late October while at the same time, advising Delphi of the sum of £5.4m to enhance the CT deduction for the year to 30 June 2009. 263. We also have regard to the CT return enquiry into [Delphi] for the year 30 June 2008 having been opened in September 2009, and Spotlight 5 having been in the background at the time of tranche 4 being implemented. With the ongoing enquiry into Delphi, and the largescale enquiry into other Clavis Scheme users that Delphi (via Dickinsons as its adviser) would have been aware of, [Delphi] had not taken any steps at that juncture to re-evaluate the Scheme prior to embarking on tranche 4. 264. To the extent that the Scheme purported to obtain a CT deduction through the provision of service in the form of an independent review of Delphi to make the remuneration recommendation so as to qualify for the disapplication of s 1290 CTA 2009 under sub-s (4)(a), we are satisfied that HMRC have met the burden in establishing that on the balance of probabilities, Herald did not carry out an independent review for the exemption to apply in relation to the final figure for tranche 4, and that [Delphi] knowingly instructed Herald to amend the recommended amount to £5.4m with the intention that it could double the CT deduction for the year 2009 in order to reduce its corporation tax liability. 265. We conclude that the inaccuracy in the P35 return for the tax year 2009-10 in relation to tranche 4 was due to the deliberate action on the part of [Delphi] for the deliberate penalty to be imposable.”

“The first condition is that the situation mentioned in subsection (1) above was brought about carelessly or deliberately by the taxpayer or a person acting on his behalf.” which relates to assessments for income tax and other direct taxes. While not specifically considering the penalty regime in Schedule 24, in paragraph [27] the Supreme Court recognised that “a broadly similar differential treatment of careless and deliberate conduct by the taxpayer is reflected in different levels of penalty which may be imposed”, and also noted in paragraph [33] that the amended language of section 29(4) was “designed to align section 29 with the language of the penalty regime in Schedule 24 of the 2007 Act [i.e. the penalty provisions in the present appeal], or that the new terminology was at least borrowed from it. The Supreme Court (Lord Briggs and Lord Sales delivering the judgment of the Court) said this in relation to the meaning of deliberate inaccuracy in a tax return: “[42] … The question is whether it means (i) a deliberate statement which is (in fact) inaccurate or (ii) a statement which, when made, was deliberately inaccurate. If (ii) is correct, it would need to be shown that the maker of the statement knew it to be inaccurate or (perhaps) that he was reckless rather than merely careless or mistaken as to its accuracy. [43] We have no hesitation in concluding that the second of those interpretations is to be preferred, for the following reasons. First, it is the natural meaning of the phrase “deliberate inaccuracy”

“In our view, a deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. This is a subjective test. The question is not whether a reasonable taxpayer might have made the same error or even whether this taxpayer failed to take all reasonable steps to ensure that the return was accurate. It is a question of the knowledge and intention of the particular taxpayer at the time.”

“… I would simply summarise the principles as follows:- i) The test promulgated by the CJEU in Kittel was whether the taxpayer knew or should have known that he was taking part in a transaction connected with fraudulent evasion of VAT. ii) Ultimately the question in every Kittel case is whether HMRC has established that the test has been met…. iii) It is not relevant for the FTT to determine whether the conduct alleged by HMRC might amount to dishonesty or fraud by the taxpayer, unless dishonesty or fraud is expressly alleged by HMRC against the taxpayer. If it is, then that dishonesty or fraud must be pleaded, particularised and proved in the same way as it would have to be in civil proceedings in the High Court. iv) In all Kittel cases, HMRC must give properly informative particulars of the allegations of both actual and constructive knowledge by the taxpayer.”

“13. As held by the Supreme Court in [Tooth] at [47], for there to be a deliberate inaccuracy in a document within the meaning of s.118(7) TMA there will have to be demonstrated an intention to mislead the Revenue on the part of the taxpayer as to the truth of the relevant statement or, perhaps, (although it was not necessary to decide it in that appeal or in this case) recklessness as to whether it would do so. The Supreme Court observed at [83] that deliberate behaviour generally describes conduct that “amounts to fraud or is akin to fraud”. … 47. The requirement under s 36 TMA to demonstrate fraud or wilful default has now been replaced with the concept of deliberate behaviour, but as was said in Tooth, deliberate behaviour in this context is conduct that amounts to fraud or is akin to fraud and HMRC have accepted that the behaviour alleged in this case can be characterised as dishonest. HMRC also accepted that the burden of proof is on them to prove the deliberate behaviour in question. 48. It is also clear in this case that HMRC, in its Statement of Case, made no allegation of deliberate behaviour against Firm A. That document pleaded that a loss of tax had arisen because Dr Danapal himself had acted deliberately or carelessly in completing the returns. Likewise, in its skeleton argument before the FTT, HMRC’s submissions on deliberate behaviour were confined to making submissions of deliberate behaviour on the part of Dr Danapal, making reference to his defence that he acted on the advice of Firm A. However, no direct allegations were made against Firm A and it is therefore to be assumed that HMRC rejected Dr Danapal’s contentions that he acted in accordance with advice given to him by Firm A. 49. In those circumstances, it was clearly wrong for the FTT to have made the findings they did of dishonesty on the part of Firm A. Such a finding could have had serious implications for Firm A as a professional firm of chartered accountants and it was given no opportunity to refute them.”

“Put simply, in order for HMRC to discharge the burden of demonstrating that an act or omission by a taxpayer was deliberate, they will need to establish to the normal civil standard that the act or omission was intentional; the fact that an act or omission may have been careless, mistaken or stupid is not enough.”

“These allegations [i.e. in relation to the implementation of Tranche 4] do not explain how the alleged lack of an independent review caused an inaccuracy in the P35 return for 2009-10. It is submitted that even if there was no independent review, this would have only affected the CT position: the PAYE/NIC deductibility would have remained the same at the time the P35 was submitted per the applicable case law.”

“262. Depending on the precise circumstances, an inaccuracy may also be held to be deliberate where it is found that the person consciously or intentionally chose not to find out the correct position, in particular, where the circumstances are such that the person knew that he should do so. We have special regard to the fact that Dickinsons, as advisers to Delphi, was in correspondence with HMRC in late October while at the same time, advising Delphi of the sum of £5.4m to enhance the CT deduction for the year to 30 June 2009. 263. We also have regard to the CT return enquiry into [Delphi] for the year 30 June 2008 having been opened in September 2009, and Spotlight 5 having been in the background at the time of tranche 4 being implemented. With the ongoing enquiry into Delphi, and the largescale enquiry into other Clavis Scheme users that Delphi (via Dickinsons as its adviser) would have been aware of, [Delphi] had not taken any steps at that juncture to re-evaluate the Scheme prior to embarking on tranche 4.”

“151. The test for carelessness is that of a reasonable and prudent taxpayer. The phrase “due to” in Schedule 24, paragraph 3 does not import a causal test analogous to delict but rather asks whether the inaccuracy in question (here the absence of any reference to the Redress Payment in the First Appellant’s tax return) be accounted for by a failure to take care; we respectfully endorse the analysis on this particular point in Delphi Derivatives Ltd v HMRC [2023] UKFTT 722 (TCC) [166], [171].”