Curzon – contractor loan scheme notifiable under DOTAS but scheme administrator not a 'promoter'

In HMRC v Curzon Capital Ltd [2019] UKFTT 0063 (TC), the First-tier Tribunal (FTT) has held that a contractor loan scheme was a notifiable arrangement for the purposes of the disclosure of tax avoidance schemes (DOTAS) regime, but that the administrator of the arrangements was not a promoter. Accordingly, HMRC's application for an order that the arrangements were notifiable was dismissed.

Background

The arrangements involved employees becoming members of an offshore limited liability partnership (LLP) and supplying their services to their previous employer through the LLP and a trust. Payment was made through the LLP and trust, with 82% of the gross fee being used to make loans to the employees.   

Curzon Capital Limited (Curzon) was a corporate finance adviser. It acted as a sponsor and operator of a number of unregulated collective investment schemes and provided investment advice and financial administration services. Curzon administered the arrangements under consideration in return for a fee. This involved processing standardised partnership and loan paperwork, preparing invoices, distributing profits and providing tax-related information on instruction from the designer of the arrangements. It also prepared and distributed to a large number of IFAs, a 'briefing pack', which explained the arrangements.

HMRC applied to the FTT for an order under section 314A, Finance Act 2004 (FA 2004), that the arrangements were 'notifiable' arrangements under section 306, FA 2004, or, in the alternative, that the arrangements were to be treated as notifiable, under section 306A, FA 2004.  

FTT decision

HMRC's application was refused.  

The FTT determined that the arrangements fell within section 306(1)(a), on the basis that they comprised 'a scheme, transaction or series of transactions designed to enable someone to obtain an advantage in relation to income tax, and the main benefit from the arrangements was the obtaining of that advantage'. 
Whether the arrangements were notifiable then depended on whether they fell within any of the descriptions prescribed by the Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations SI 2006/1543. 

Although the FTT determined that the arrangements were notifiable under the 'premium fee' and 'standardised tax products' hallmarks, it considered that it was implicit from sections 314A and 306A, FA 2004, that it could only make the order sought by HMRC if it was satisfied that Curzon was a 'promoter' under section 307, FA 2004. 

The FTT found that Curzon carried on a 'relevant business' for the purposes of section 307(2)(a), FA 2004, because its administration of the arrangements, which were a large part of its business, was the provision of services related to taxation. 

In the view of the FTT, the contacts made by Curzon with the IFAs were 'marketing contacts' within the meaning of section 307(4B), FA 2004, and therefore each contact amounted to a 'firm approach' for the purpose of section 307(4A), FA 2004. However, as Curzon was reliant on the designer of the arrangements to make them available for implementation, Curzon was not a 'promoter' because the definition of 'promoter' required, as HMRC's own guidance confirmed, that Curzon make the firm approach with a view to making the arrangements available for implementation. Curzon did not make the arrangements available for implementation, it was the designer of the arrangements who did that. 

Comment

This decision is the first time the meaning of 'promoter' has been considered by the FTT.  Whilst the FTT's conclusion that Curzon was not a promoter is not surprising given the definition provided in the legislation and HMRC's own guidance, the decision does provide helpful guidance on who will qualify as a 'promoter' for the purpose of the DOTAS regime.  Of particular interest is the FTT's broad interpretation of 'relevant business'.