Recent Tax Cases – April 2021

This article seeks to highlight some recent tax cases from the Courts worthy of attention - full details of each case can be found on relevant databases. Future articles will continue this objective

April 2021

Brocklesby [2021] TC 07970 in which the First-tier Tribunal (FTT) allowed a taxpayer’s appeal against late filing penalties

The first case is Brocklesby [2021] TC 07970 in which the First-tier Tribunal (FTT) allowed a taxpayer’s appeal against late filing penalties on the basis that he had a reasonable excuse.

This case highlights difficulties faced by many when trying to comply with their tax obligations, especially when faced with increased HMRC centralisation and an increasingly digital tax system.

The FTT found that given the taxpayer’s annual income of £3,500 he should not need an agent to deal with his tax affairs and the FTT found that the taxpayer’s late filing penalties resulted, at least in part, from poor advice from HMRC and delays at HMRC. MTD is not far away and it will be interesting to see how taxpayers can cope with reduced income and increasingly complicated tax legislation and an increasingly digital tax system.

Foojit Ltd v R & C Commrs [2021] UKUT 14 (TCC) on when dividends become payable

The second case is Foojit Ltd v R & C Commrs [2021] UKUT 14 (TCC) where the Upper Tribunal (UT) held that although the amount of preferential dividends payable was determined in advance, the date or dates on which they became payable depended on a further decision being made.

Consequently, the relevant shares requirement for EIS relief was not met. It was accepted by both parties that the dividends did carry a “present or future preferential right to dividends”. Clearly the company had ensured that the amount of the dividend payable was ascertained in advance and could not be changed at the directors’ discretion, but it appears that they had not adequately addressed the question of when the dividend became payable.

Cases expanding on the case law of what qualifies as plant

Finally, there have been two cases recently expanding on the case law of what qualifies as plant; firstly R & C Commrs v SSE Generation Ltd [2021] EWCA Civ 105 where the Court of Appeal upheld the decision of the UT that expenditure on certain structures in a hydroelectric power plant qualified for plant and machinery capital allowances.

The second case was Cheshire Cavity Storage 1 Ltd & Anor v R & C Commrs [2021] UKUT 50 (TCC) where the UT upheld the FTT’s decision that expenditure on underground cavities for gas storage did not fall within the definition of “plant”.

By Tony Jenkins