CheckLists.Tax (beta)
B4. Disposal of right to income
GENERAL
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Capital or income
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- Proceeds of sale for a lump sum of an annuity were capital (Paget v IRC [1938] 2 KB 25)
- Assignment of 6 years' rent for lump sum constituted capital (CIR v. John Lewis Properties Plc [2002] EWCA Civ 1869)
- Disposal of film rights in a book for 10 years for a lump sum not calculated by reference to a royalty was capital (Nethersole v Withers (1948) 28 TC 501)
- On sale of right to dividend see IRC v. McGuckian [1997] UKHL 22;
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Classifying receipt from disposal
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INCOME TAX
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Sale of occupation income​
XX
XX
Legislation: ITA s.780
Cases:
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Tax on income arising post-assignment
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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:
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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).
- Note also the question of whether the assignment was valid in law (Good, §93).​
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Legislation:
Cases:
Good v. HMRC [2023] EWCA Civ 114, Whipple LJ;
HMRC manuals:
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- Transfer of occupation income
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XX
Legislation: ITA 2007, s.773;
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Transfer of income without asset
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Transfer of income stream anti-avoidance
XX
Legislation: ITA 2007809AZA
Cases:
HMRC manuals:
Commentary: Kessler;
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