Marlborough DP Limited v Commissioners for HMRC

Marlborough DP Limited v Commissioners for HMRC

The phrase 'in connection with employment' in section 554A(1)(c) ITEPA does not require causation; Parliament intended a broader test. The arrangements and loans to Dr Thomas were sufficiently connected to his employment/directorship to fall within Part 7A. The corporation tax deduction was not allowable as the payments were not incurred wholly and exclusively for the purposes of MDPL's trade but for tax avoidance and the benefit of Dr Thomas.

Parties
Appellant: Marlborough DP Limited; Respondents: Commissioners for His Majesty's Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
10 March 2025
Procedural Posture
Civil Appeal / Court of Appeal Judgment
Outcome
Appeal dismissed
Legal Topics
Income Tax (earnings and Pensions) Act 2003 Part 7 a, Corporation Tax Deductibility, Tax Avoidance Schemes, Interpretation of 'in Connection With', PAYE and National Insurance Contributions
Tax Law Employment Law Corporate Law Income Tax (earnings and Pensions) Act 2003 Part 7 a Corporation Tax Deductibility Tax Avoidance Schemes Interpretation of 'in Connection With' PAYE and National Insurance Contributions

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Parties

Marlborough DP Limited

Appellant

Commissioners for His Majesty's Revenue and Customs

Respondents

Procedural Posture

Civil Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Interpretation of 'in connection with ... employment' under section 554A(1)(c) ITEPA
  2. 2 Deductibility of expenses for corporation tax purposes under 'wholly and exclusively' test
  3. 3 Application of anti-avoidance provisions in Part 7A ITEPA

Ratio Decidendi

The phrase 'in connection with employment' in section 554A(1)(c) ITEPA does not require causation; Parliament intended a broader test. The arrangements and loans to Dr Thomas were sufficiently connected to his employment/directorship to fall within Part 7A. The corporation tax deduction was not allowable as the payments were not incurred wholly and exclusively for the purposes of MDPL's trade but for tax avoidance and the benefit of Dr Thomas.

Court Disposition

Appeal dismissed

Orders

  • Loans/contributions in relevant years chargeable to income tax under Part 7A ITEPA
  • Contributions made by MDPL in applicable accounting periods non-deductible for corporation tax purposes