Hepburn v Revenue & Customs [2013] UKFTT 445 (TC) (20 August 2013)

Hepburn v Revenue & Customs [2013] UKFTT 445 (TC) (20 August 2013)

The Tribunal found that the substance and commercial effect of the arrangements was that Ms Hepburn was never entitled to the consultancy fee as an individual; the fee was always intended to be paid to Torglenn Ltd once incorporated. The arrangements were genuine commercial transactions, not a tax avoidance scheme. The fee was properly accounted for as income of Torglenn Ltd, which paid corporation tax on it, and there was no basis for taxing Ms Hepburn personally on the same sum. There was no negligent conduct by Ms Hepburn in relying on the accepted accounting treatment.

Citation
[2013] UKFTT 445 (TC)
Parties
Appellant: Maureen Hepburn; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
20 August 2013
Procedural Posture
Income Tax Appeal (first Tier Tribunal Tax) / Final Judgment After Substantive Hearing
Outcome
Appeal allowed
Legal Topics
Income Tax Liability, Consultancy Fees, Unincorporated Companies, Company Promoters, Accounting Practice, Unjust Enrichment, Statutory Penalties
Tax Law Company Law Income Tax Liability Consultancy Fees Unincorporated Companies Company Promoters Accounting Practice Unjust Enrichment +1 more

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 4 Authorities cited 12 Party arguments 2 Amounts and remedies 3
Sign in to unlock

Parties

Maureen Hepburn

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Income Tax Appeal (first Tier Tribunal Tax) / Final Judgment After Substantive Hearing

Legal Issues

  1. 1 Whether the consultancy fee paid to a newly formed company for services performed before its incorporation is taxable as income of the individual (Ms Hepburn) or of the company (Torglenn Ltd)
  2. 2 Whether Ms Hepburn was contractually or otherwise entitled to the consultancy fee as an individual
  3. 3 Whether the arrangements constituted a tax avoidance scheme

Ratio Decidendi

The Tribunal found that the substance and commercial effect of the arrangements was that Ms Hepburn was never entitled to the consultancy fee as an individual; the fee was always intended to be paid to Torglenn Ltd once incorporated. The arrangements were genuine commercial transactions, not a tax avoidance scheme. The fee was properly accounted for as income of Torglenn Ltd, which paid corporation tax on it, and there was no basis for taxing Ms Hepburn personally on the same sum. There was no negligent conduct by Ms Hepburn in relying on the accepted accounting treatment.

Court Disposition

Appeal allowed

Orders

  • Discovery assessments for income tax and national insurance against Ms Hepburn set aside
  • Statutory penalty determination against Ms Hepburn set aside