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The First De Sales Ltd Partnership & Ors v HMRC – FTT decision

The First De Sales Ltd Partnership & Ors v HMRC

The FTT has struck out the taxpayers’ appeals against HMRC closure notices on the basis they had no prospect of success.


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The taxpayers, a group of limited liability partnerships (LLPs) entered into tax arrangements that were notifiable under the Disclosure of Tax Avoidance Schemes (DOTAS) regime. As part of the arrangements, the LLPs made significant payments which were contractual considerations for specific individuals granting restrictive undertakings. The LLPs then claimed tax deductions in their partnership tax returns for these payments. HMRC refused the deductions on the basis that the payments were being made primarily for the purposes of the tax arrangements. The First-tier Tribunal (FTT) has struck out the LLPs’ appeals, ruling that they had no prospect of success.

In its decision, the FTT highlights that the payments made in respect of the restrictive undertakings were several hundred million pounds in relation to employees on modest salaries with primarily administrative duties, and lasted only six months after the employment ceased. Therefore the FTT held that any loss to the LLPs would be minimal, and that this fact suggested that the payments were not ‘in respect of’ the restrictive undertakings, but were ‘in respect of’ a tax avoidance arrangement.

The FTT decision also states that the appeal would not have been struck out if the LLPs had provided evidence in support of an entitlement to at least some deduction, as this would deprive the appellants of the ability to argue for any deduction. However, in the judge’s opinion, the LLPs had not provided evidence to support any deduction at all, and so striking out the appeal would save both the parties costs and the FTT’s time and resources.

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Chris Davidson


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