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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Commissioners for His Majesty's Revenue and Customs v MR Currell Ltd [2026] EWCA Civ 445 (17 April 2026) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2026/445.html Cite as: [2026] EWCA Civ 445 |
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ON APPEAL FROM THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
MR JUSTICE RICHARD SMITH AND JUDGE JEANETTE ZAMAN
[2024] UKUT 404 (TCC)
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE FALK
and
LORD JUSTICE FOXTON
____________________
| THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS |
Appellants |
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| - and – |
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| M R CURRELL LIMITED |
Respondent |
____________________
Ben Elliott (instructed by Charles Russell Speechlys LLP) for the Respondent
Hearing dates: 24 and 25 March 2026
____________________
Crown Copyright ©
Lady Justice Falk:
Introduction
The facts
a) All of the transactions, that is the Payment, the Loan, the share sale and the loan to the Company by Mrs Currell, were "prewired". The Company required the working capital in its business and it was "inevitable" that the £800,000 would find its way back to it ([31(8)] and [36(13)]).
b) For that reason the FTT was unconvinced by the Company's evidence about the purpose of the arrangements being to "ring-fence" funds in the EBT to allow the payment of bonuses, because once back in the Company the funds were still at risk of business failure, and the security for the Loan would be worthless in that event ([36(9)-(19)]).
c) Rather, the "substantial reason" for the Company to make the Payment was to enable the Trustee to meet its commitment to provide the Loan ([30], [32]).
d) Mrs Currell's loan to the Company could be repaid "whenever she wanted" and the funds used for the "mutual benefit" of Mr and Mrs Currell ([16(3)], [50]).
e) The FTT accepted that the Loan was a genuine loan with a real repayment obligation, that Mr Currell had the independent funds to settle it on the repayment date and that he was "fully conscious" of his obligation to repay on that date ([36(10)], [43]).
f) The reason why the Trustee did not ask Mr Currell to repay the Loan in November 2015 was because of a concern about double taxation. By then HMRC had already opened an enquiry into the arrangements and had issued the determinations in March 2015. There was a concern that, if the money had been repaid and then used to pay bonuses, there would have been tax on the payment of those bonuses as well ([15(31)], [16(8)]).
g) If the Company had not made the Payment it would not have paid Mr Currell £800,000 as remuneration for his work. The Payment did not replace remuneration which Mr Currell had sacrificed or reduced in anticipation of receiving it ([15(12) and (13)]). There was "no evidence" that, if the £800,000 had not been paid by way of a loan, it would have been paid as salary or other remuneration ([54(10)]).
h) However, the only reason the Loan was made was "because of the work which [Mr Currell] had done over the years in building up the business firstly as a sole trader, then in partnership, and then via the medium of the company" ([53]).
The relevant statutory provisions
"(a) any salary, wages or fee, (b) any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money's worth, or (c) anything else that constitutes an emolument of the employment."
"Money's worth" is defined in section 62(3) as something that is of direct monetary value to the employee, or is capable of being converted into money or something that is of direct monetary value.
The reasoning of the FTT
"… we first need to consider whether, as a matter of law, a genuinely repayable loan can be a reward or benefit in the first place (whatever the reasons for its payment), and more importantly whether the Loan was a reward or benefit in this case".
"In summary, therefore, it is our view that as a matter of law there is nothing which prevents a genuine money loan on commercial terms conferring a benefit on the borrower. It is our view that in the vast majority of cases in practice, such a loan will confer a benefit. And in the context of this case, the Loan conferred a benefit on [Mr Currell]. Its payment to [Mr Currell], therefore, was potentially within the ambit of section 62 ITEPA. Whether it was earnings depends on the substantial reason for its payment."
"… a real loan with a genuine obligation to repay does not, as a matter of law, mean that it simply cannot be earnings. The enquiry is still the same. What is the reason for payment of the Loan. If it was paid as a reward or benefit for [Mr Currell] for his exertions as an employee/director of the company, then it is earnings even though there was a genuine obligation to repay it. Rangers is authority for this proposition."
Mr Ghosh accepted that the FTT made an error in this paragraph.
"But it is precisely because [Mr Currell] has been 'under rewarded' that the Trustee considered that [he] should be granted a loan which the Trustee knew would be introduced into the company in a form which [Mr Currell] could access without payment of tax."
"56. We have found that it was inevitable, at the time at which the Payment was made by the company to the EBT, that it would be paid by the Trustee to [Mr Currell] by way of the Loan. We have also found that it was more likely than not that the Loan was paid to [Mr Currell] as a reward for the services which he had provided to the company. In our view there is no legal principle which prevents a genuine money loan on commercial terms with a real repayment obligation from being a reward or benefit.
57. In these circumstances [it] is our view that the Payment, therefore, was paid by the company as a reward for the services supplied by [Mr Currell] to the company. It therefore comprises earnings and [is] thus taxable as asserted by HMRC."
The UT's decision
The grounds of appeal
Ground 1: The UT erred in detecting a material error of law in the FTT's decision.
Ground 2: The UT erred in concluding that, in order for a "redirected earnings" analysis to apply, it is necessary for there to be an entitlement of some kind to the earnings in question before they are redirected. The UT also made further related errors in re-making the FTT's decision.
Ground 3: The UT erred in reaching its conclusion that the making of the Loan did not constitute a payment of earnings.
Ground 4: The UT mischaracterised the factual and evaluative conclusions which the FTT reached.
Whether the FTT erred in law
The approach of this court
The Rangers litigation
The facts
The decisions below
The Supreme Court's reasoning
"… where the employer spends money to confer a benefit in kind which the recipient cannot convert into money. Such expenditure is not a perquisite or profit, gratuity or incidental benefit for the reasons discussed above and only falls within the income tax regime because of special statutory provision, such as, currently, the "benefits code" in Part 3, Chapters 2–11 of ITEPA, which cover among others the provision of living accommodation, cars or loans and the payment of expenses…" ([46])
"58. In summary, (i) income tax on emoluments or earnings is due on money paid as a reward or remuneration for the exertions of the employee; (ii) focusing on the statutory wording, neither section 131 of ICTA nor section 62(2)(a) or (c) of ITEPA, nor the other provisions of ITEPA which I have quoted (except section 62(2)(b)), provide that the employee himself or herself must receive the remuneration; (iii) in this context the references to making a relevant payment 'to an employee' or 'other payee' in the PAYE Regulations fall to be construed as payment either to the employee or to the person to whom the payment is made with the agreement or acquiescence of the employee or as arranged by the employee, for example by assignation or assignment; (iv) the specific statutory rule governing gratuities, profits and incidental benefits in section 62(2)(b) of ITEPA applies only to such benefits; (v) the cases, to which I have referred above, other than Hadlee, do not address the question of the taxability of remuneration paid to a third party; (vi) Hadlee supports the view which I have reached; and (vii) the Special Commissioners in Sempra Metals (and in Dextra) were presented with arguments that misapplied the gloss in Garforth and erred in adopting the gloss as a principle so as to exclude the payment of emoluments to a third party.
59. Parliament in enacting legislation for the taxation of emoluments or earnings from employment has sought to tax remuneration paid in money or money's worth. No persuasive rationale has been advanced for excluding from the scope of this tax charge remuneration in the form of money which the employee agrees should be paid to a third party, or where he arranges or acquiesces in a transaction to that effect..."
"66. The bonuses which RFC and the other employing companies gave their executives were made available through the same trust mechanisms… The employees had no contractual entitlement to the bonuses before their employers decided to give them but that does not alter the analysis of the effect of the scheme. The fact that bonuses were voluntary on the part of the employer is irrelevant so long as the sum of money is given in respect of the employee's work as an employee: Blakiston v Cooper [1909] AC 104, 107, per Lord Loreburn LC, Hartland v Diggines [1926] AC 289, 291, per Viscount Cave LC. For the same reasons as those which cause the footballers' remuneration paid to the Principal Trust to be subject to taxation, the bonuses which were paid to the employees though the trust mechanism fall within the tax charge as emoluments or earnings when paid to the Principal Trust."
What relevant principles can be drawn from Rangers SC
Whether the Payment was earnings
Whether the Loan was earnings (Ground 3)
Concluding remarks
Lord Justice Foxton:
Lord Justice Singh: