The Commissioners for HMRC v HFFX LLP

The Commissioners for HMRC v HFFX LLP

The individual members’ rights under the Partnership Deed, combined with the decisions to reallocate Special Capital, amounted to a source from which the receipt of Special Capital was derived. The Braganza principle applied to the discretion, making the payments taxable as miscellaneous income under s.687 ITTOIA. The arrangement was materially indistinguishable from BlueCrest CA, which was dispositive.

Parties
Appellant/respondent: The Commissioners for His Majesty’s Revenue and Customs; Respondent/appellant: HFFX LLP; Individual Appellant: Stephan Atkins; Individual Appellant: Yuri Bedny; Individual Appellant: Paul Bereza; Individual Appellant: Alexander Gerko; Individual Appellant: Philip Howson; Individual Appellant: Renat Khabibullin; Individual Appellant: Joshua Leahy; Individual Appellant: Jacob Metcalfe; Individual Appellant: Alex Migita; Individual Appellant: Dmitry Shakin; Individual Appellant: Andonis Sakatis; Individual Appellant: Christopher Shucksmith; Individual Appellant: Evgeny Tanhilevich
Jurisdiction
England and Wales
Judgment Date
19 July 2024
Procedural Posture
Civil Appeal (tax) / Court of Appeal Judgment
Outcome
Appeal dismissed
Legal Topics
Income Tax—miscellaneous Income, Partnership Profits Allocation, Discretionary Remuneration, Braganza Principle, Source of Income for Tax Purposes
Tax Law Partnership Law Income Tax—miscellaneous Income Partnership Profits Allocation Discretionary Remuneration Braganza Principle Source of Income for Tax Purposes

Case Brief

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Parties

The Commissioners for His Majesty’s Revenue and Customs

Appellant/respondent

HFFX LLP

Respondent/appellant

Stephan Atkins

Individual Appellant

Yuri Bedny

Individual Appellant

Paul Bereza

Individual Appellant

Alexander Gerko

Individual Appellant

Philip Howson

Individual Appellant

Renat Khabibullin

Individual Appellant

Joshua Leahy

Individual Appellant

Jacob Metcalfe

Individual Appellant

Alex Migita

Individual Appellant

Dmitry Shakin

Individual Appellant

Andonis Sakatis

Individual Appellant

Christopher Shucksmith

Individual Appellant

Evgeny Tanhilevich

Individual Appellant

Procedural Posture

Civil Appeal (tax) / Court of Appeal Judgment

Legal Issues

  1. 1 Whether reallocation of Special Capital to individual members of HFFX LLP is taxable as miscellaneous income under s.687 ITTOIA
  2. 2 Whether a legal right to income is required for s.687 ITTOIA to apply
  3. 3 Whether the Braganza principle fetters the discretion to reallocate Special Capital

Ratio Decidendi

The individual members’ rights under the Partnership Deed, combined with the decisions to reallocate Special Capital, amounted to a source from which the receipt of Special Capital was derived. The Braganza principle applied to the discretion, making the payments taxable as miscellaneous income under s.687 ITTOIA. The arrangement was materially indistinguishable from BlueCrest CA, which was dispositive.

Court Disposition

Appeal dismissed

Orders

  • Both HMRC’s appeal on the s.850 issue and the individual members’ appeal are dismissed.