The Commissioners for HMRC v Neil Pickles & Anor.

The Commissioners for HMRC v Neil Pickles & Anor.

The market value of the benefit received by the taxpayers under s. 1020 CTA 2010 is the face value of the debt (£1,199,043) as agreed at the time of the transaction, not discounted by the company's net asset value or subsequent revaluation of goodwill. The FTT erred in law in its approach to both the identification of new consideration and the timing and valuation of the benefit.

Parties
Appellant/respondent in Cross Appeal: THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS; Respondent/appellant in Cross Appeal: MR NEIL PICKLES; Respondent/appellant in Cross Appeal: MRS SHARON PICKLES
Jurisdiction
England and Wales
Judgment Date
20 September 2022
Procedural Posture
Tax Appeal / Upper Tribunal (tax and Chancery Chamber) Appeal From First Tier Tribunal
Outcome
HMRC's appeal allowed; taxpayers' cross appeals dismissed; FTT decision set aside; Upper Tribunal remade the decision.
Legal Topics
Income Tax, Corporation Tax, Deemed Distribution, Market Value, Directors’ Loan Account, Goodwill Valuation
Tax Law Company Law Income Tax Corporation Tax Deemed Distribution Market Value Directors’ Loan Account Goodwill Valuation

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Parties

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS

Appellant/respondent in Cross Appeal

MR NEIL PICKLES

Respondent/appellant in Cross Appeal

MRS SHARON PICKLES

Respondent/appellant in Cross Appeal

Procedural Posture

Tax Appeal / Upper Tribunal (tax and Chancery Chamber) Appeal From First Tier Tribunal

Legal Issues

  1. 1 Interpretation of 'market value' under s. 1020 Corporation Tax Act 2010
  2. 2 Correct approach to determining market value of benefit received by members
  3. 3 What constitutes 'new consideration' under s. 1020 CTA 2010

Ratio Decidendi

The market value of the benefit received by the taxpayers under s. 1020 CTA 2010 is the face value of the debt (£1,199,043) as agreed at the time of the transaction, not discounted by the company's net asset value or subsequent revaluation of goodwill. The FTT erred in law in its approach to both the identification of new consideration and the timing and valuation of the benefit.

Court Disposition

HMRC's appeal allowed; taxpayers' cross appeals dismissed; FTT decision set aside; Upper Tribunal remade the decision.

Orders

  • The market value of the benefit received by the taxpayers is £1,199,043.
  • Closure notices in respect of the charge to income tax to be increased on the basis of distributions received totalling £928,843.