Holden v Revenue And Customs (INCOME TAX AND CAPITAL GAINS TAX - Limited Liability Partnership - whether amounts identified as "capital interests" were income or capital) [2026] UKUT 25 (TCC) (20 January 2026)

Holden v Revenue And Customs (INCOME TAX AND CAPITAL GAINS TAX - Limited Liability Partnership - whether amounts identified as "capital interests" were income or capital) [2026] UKUT 25 (TCC) (20 January 2026)

The Tribunal held that the 'capital interests' granted to MDPs under the LLP agreements did not constitute interests in the capital or goodwill of the LLP. The rights were not assignable outside the scheme, were subject to reduction or removal, and did not entitle holders to a share of capital profits except on winding up. The payments made on disposal of these interests were not proceeds from the sale of a capital asset but were taxable as miscellaneous income under ITTOIA s 687. The mixed member partnership rules did not apply. Procedural challenges to HMRC assessments succeeded for some appellants but not for Mr Holden, whose assessment was upheld as valid.

Citation
[2026] UKUT 25 (TCC)
Parties
Appellant / Respondent in Cross Appeal: Mark Benedict Holden; Respondent / Appellant in Cross Appeal: The Commissioners for His Majesty's Revenue and Customs (HMRC); Respondent in Cross Appeal: The Boston Consulting Group UK LLP; Respondent in Cross Appeal: Afonso Nascimento; Respondent in Cross Appeal: Philip Krinks; Respondent in Cross Appeal: Michael Niddam; Respondent in Cross Appeal: Thomas Garside
Jurisdiction
United Kingdom
Judgment Date
20 January 2026
Procedural Posture
Appeal and Cross Appeal From First Tier Tribunal (tax) / Upper Tribunal (tax and Chancery Chamber) Judgment
Outcome
Appeal by Mr Holden dismissed; HMRC's cross-appeal dismissed; FTT's decision largely upheld with minor procedural modifications.
Legal Topics
Income Tax, Capital Gains Tax, Limited Liability Partnerships, Mixed Member Partnership Rules, Miscellaneous Income, Occupational Income, Procedural Validity of Assessments
Tax Law Partnership Law Income Tax Capital Gains Tax Limited Liability Partnerships Mixed Member Partnership Rules Miscellaneous Income Occupational Income +1 more

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Parties

Mark Benedict Holden

Appellant / Respondent in Cross Appeal

The Commissioners for His Majesty's Revenue and Customs (HMRC)

Respondent / Appellant in Cross Appeal

The Boston Consulting Group UK LLP

Respondent in Cross Appeal

Afonso Nascimento

Respondent in Cross Appeal

Philip Krinks

Respondent in Cross Appeal

Michael Niddam

Respondent in Cross Appeal

Thomas Garside

Respondent in Cross Appeal

Procedural Posture

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

Legal Issues

  1. 1 Whether amounts identified as 'capital interests' were income or capital for tax purposes
  2. 2 Whether mixed member partnership rules (ITTOIA s 850C) applied
  3. 3 Whether payments were taxable as miscellaneous income under ITTOIA s 687

Ratio Decidendi

The Tribunal held that the 'capital interests' granted to MDPs under the LLP agreements did not constitute interests in the capital or goodwill of the LLP. The rights were not assignable outside the scheme, were subject to reduction or removal, and did not entitle holders to a share of capital profits except on winding up. The payments made on disposal of these interests were not proceeds from the sale of a capital asset but were taxable as miscellaneous income under ITTOIA s 687. The mixed member partnership rules did not apply. Procedural challenges to HMRC assessments succeeded for some appellants but not for Mr Holden, whose assessment was upheld as valid.

Court Disposition

Appeal by Mr Holden dismissed; HMRC's cross-appeal dismissed; FTT's decision largely upheld with minor procedural modifications.

Orders

  • Payments to MDPs in respect of 'capital interests' are taxable as miscellaneous income under ITTOIA s 687.
  • Mixed member partnership rules do not apply to the payments.