CheckLists.Tax (beta)
E1. Trading transactions: general
EXISTENCE OF A TRADE
- Relevant factors
Profitability
- No requirement that trade must be carried on with a view to profit (Hoey, §192).
Tax avoidance
- Relevant if transactions so affected/inspired by tax considerations that shape and character no longer a trading transaction (Hoey, §193; Ingenious, §198; Lupton at 647).
Legislation:
Cases:
FA & AB Ltd v Lupton [1872] AC 634 (HoL);
Ingenious Games LLP v Revenue & Customs Commissioners [2021] EWCA Civ 1180;
Hoey v. HMRC [2022] EWCA Civ 656;
HMRC manuals:
Commentary:
See also:
Mutual trading
Contributors to a common fund participating in a surplus not a profit
- There must be a common fund (MDU, §52(1))
- There must be complete identity between the contributors and the participators in the Surplus (MDU, §51)
- Complete identity not breached by owner of common fund being a separate legal personality, but must participate in surplus in same capacity as when contributing funds (MDU §52(3), (4))
- Complete identity relates to the class entitled to be benefit: actual individual benefits not required to be in proportion to contributions (MDU, §52(5))
- Activity carried on with outsiders unlikely to amount to mutual activity (MDU, §52(1))
- Paying contributions to a mutual defence union that takes out insurance is a common fund and a rebate to that fund is not taxable (MDU, §§61 - 64)
Legislation:
Cases: Medical Defence Union Limited v. HMRC [2021] UKUT 249 (TCC);
HMRC manuals:
Commentary:
See also:
VAT
Quantum of consideration
- Disbursements
General rule
- Expenses incurred by a supplier for the purpose of making the supplier's own supply to the customer are not disbursements.
- Was the third-party supply purchased in order to enable the supplier to effectively make its own supply?
- Where the supplier merely acts as the customer's agent in arranging for and paying for a supply by a third party to the customer, the sum is not VAT consideration for the supplier's own (separate) supply (if any) to the customer (British Airways Plc v. Prosser).
- But still consider whether the supplier/agent is deemed to have received and made the supply by the third party under the agency rules (VATA s.47).
Examples
- Car dealer paying initial registration duty in respect of a car sold to a customer was a disbursement in De Danske because there was no requirement that the car had to be registered when supplied.
- Payment of stamp duty or court fees by solicitor is a disbursement (Rowe & Maw).
- Travel costs of a solicitor for him/her to travel to location where service is to be performed are not a disbursement (Rowe & Maw).
- Purchasing a ticket to allow client to travel is a disbursement (Rowe & Maw).
- Bank fees paid by solicitor as part of transferring money during conveyance were not disbursements - the service was provided to the solicitor and the bank did not know the identity of the client (Shuttleworth).
- Search fees paid by conveyancing solicitors were not a disbursement in Brabners LLP - they were incurred in the course of the solicitors making their own supply, in order to exercise reasonable car and skill
- Fee for obtaining medical notes that solicitor used to complete the necessary medical evidence for litigation not a disbursement (Makuwatsine).
- However, held to be a disbursement in Barratt on the ground that the act of obtaining the medical records was distinct from the subsequent use of them by the solicitor. The act of obtaining records which were owned by the client was a distinct act, provided to the client as a convenience.
- Medical reporting organisation unlikely to be acting as agent for ultimate client (British Airways Plc, §31).
Legislation: VATA s.47;
Cases:
Rowe & Maw v Customs and Excise Commissioners [1975] 1 WLR 1291;
Shuttleworth & Co. v Customs and Excise Commissioners (1994) Decision No. 12805;
De Danska Bilimporter C-98/05;
Barratt v. HMRC [2011] UKFTT 71 (TC);
British Airways Plc v. Prosser [2019] EWCA Civ 547;
HMRC manuals:
Commentary:
See also: