CheckLists.Tax (beta)
A5: Individual receiving/entitled to income
GENERAL
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- Meaning of receives
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Legislation:
Cases:
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals:
Commentary:
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- Meaning of entitled
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- Ordinary words to be given their ordinary meaning.
- Realistic appraisal of substance of arrangement (Good, §55).
- Not the same as beneficial entitlement or beneficial ownership or, necessarily, 'belonging' (Good, §§55, 56).
- Manner in which a payment is used by be relevant to determining entitlement (Good, §57).
Legislation:
Cases:
Good v. HMRC [2023] EWCA Civ 114, Whipple LJ;
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals:
Commentary:
See also:
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- Person assigning right to income still entitled to income if receipt by 3rd party benefits assignor
-Assignor still treated as entitled if payment of the income to a third party benefits them (Burley, §82).
- For instance, where supplier instructs customers to money directly to bank to be treated as a reduction of the supplier's debt (Good, §89).
- "[67]...The cases establish a broader principle that a person can, depending on the terms of the statute and the context of the particular payments, be held accountable to tax on payments to a third party if that person benefits from those payments.
[68]...In each of them, the taxpayer derived a benefit from the payment which was actually received by a third party, which benefit was sufficient to demonstrate their entitlement to the income for tax purposes..." (Good see also §93).
- Same result applied in Burley where the Partnership assigned to the lender by way of security all amounts due under a film lease and the partner assigned, absolutely, his right to income from the partnership - partner still entitled to the income used to discharge the loan for which he was personally liable (§§83 - 84).​
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Legislation:
Cases:
Good v. HMRC [2023] EWCA Civ 114;
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals:
Commentary:
See also:
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- Product of personal exertion derived by the person who performs the personal exertion irrespective of who it is paid to​
-"Richardson J. said: "There is no justification in principle for differentiating between salary and wage earners and professionals whose income is the product of their personal exertion. In either case the person whose personal exertion earns the income derives the income."
Their Lordships are in complete agreement with these comments and therefore conclude that the reasoning in Everett (supra) would not normally be applicable to the position of partners in New Zealand. Since no income producing proprietary interest was assigned by the taxpayer the argument fails." (Hadlee v. CIR [1993] AC 524).
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Legislation:
Cases:
HMRC manuals:
Commentary:
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- Retaining right to reversion of income rights may means assignor continues to be entitled to income
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- "[69] I accept Mr Baldry's point that the Scheme did not envisage implementation of these reversionary rights, because the intention was that the MAPs would meet the interest due under the Loan up to the point that the Scheme concluded, but nonetheless, as a matter of contract, the taxpayer retained a right of reversion, and for that further reason cannot be said to have divested himself completely of the MAPs so as no longer to be entitled to them." (Good).
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Legislation:
Cases:
Good v. HMRC [2023] EWCA Civ 114, Whipple LJ;
HMRC manuals:
Commentary:
See also:
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INCOME TAX
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Residence (effect of)
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- Non-resident individuals receiving non-UK income (exclusions from charge)
Trading income - ITTOIA 2005, s.6
Property income - ITTOIA 2005, s.269
Savings and investment income - ITTOIA 2005, s.368
Miscellaneous income - ITTOIA 2005, s.577
Employment income - ITEPA 2003, s.15
Pension income - ITEPA 2003, s.575
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- Non-resident individuals receiving UK source income (relief on some UK source income)
General rule
- Income tax liability of non-resident individuals is limited to tax deducted at source plus tax on income that is not disregarded income.
- Certain reliefs are disregarded (e.g. personal allowance).
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Disregard income
- Property income and employment income are not disregarded income.
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Exception for income in relation to which there is a UK representative (branch or agency)
- Certain income in relation to which the non-UK resident has a UK representative (branch or agency) is not disregarded income.
Legislation: ITA 2007, s.811, s.813(2), ss.835C - 835S.
HMRC manuals: INTM268020;
Commentary: Kessler, Chapter 50;
See further:
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- Split-year residents cannot rely on relief in relation to UK source income
- Relief in ITA 2007 s.811 does not apply to persons claiming split year treatment.
Legislation: ITA 2007, s.810(4)
Cases:
HMRC manuals:
Commentary: Kessler, Chapter 50;
See further:
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General issues
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- Person entitled v. person received (who should pay?)
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- Often person liable is the person who receives or is entitled to income.
- Query whether HMRC have an election between person entitled and person receiving (Burley, §74).
- "The ‘receiving’ basis enables you to tax the person in receipt of the income, even if you cannot trace the person entitled to it. But ultimately you want to tax the person who is entitled." (TSEM9310).
Legislation:
Cases:
Burley v. HMRC [2025] UKFTT 989 (TC), Judge Baldwin;
HMRC manuals: TSEM9310;
Commentary:
See also:
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Annual payments
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- Charge on annual payments (payments of an income character capable of recurrence)
​General rule
- Income tax charge on annual payments not charged as a result of any provision (ITTOIA s.683).
- Unless not charged under another provision as a result of an exemption (s.683(2)).
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Meaning of annual payment
- Case law establishes that, in general, to be an annual payment, the payment must be (IRC v. Whitworth Park Coal):​
(1) Of the same kind as specific instances of interest an annuities.
(2) Not merely voluntary.
- Payments by trustees to beneficiaries, even in the exercise of a discretion, are not voluntary (Tollemache).
- Payments by trustees to non-beneficiaries could, in theory, be voluntary, but query the legal basis (Lindus and Hortin).
(3) Annual in the sense of recurrent or capable of recurrence.
- Payments at random intervals of varying amounts may still be annual (Whitworth Park Coal).
- Assumed to be the case for s.683(3) - see below.
(4) Pure income in the recipient's hands.
- See above on capital v. income distributions from trust.
- Pure income means that recipient must not have incurred deductible expenditure in return for the payment.
- Thus contracting with a butcher for an annual sum to supply meat for a year is not pure income for the butcher (Earl Howe v. IRC).
- Need not be pure bounty - some inducement to make the payment may not prevent it being annual payment (Campbell).
Payment by individual, arising in the UK (exception)
- Charge does not apply to annual payment by an individual arising in the UK (ITTOIA s.727).
- Exception does not apply if payment is made for commercial reasons (s.728).
- See also s.729.
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Other exceptions
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Legislation: ITTOIA s.687
Cases:
HMRC manuals:
Commentary:
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Miscellaneous income
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Priority of other tax charges
- Miscellaneous income charge is the fall back charge (secondary to annual payments and disguised interest).
Legislation: ITTOIA s.687
Cases:
HMRC manuals:
Commentary:
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