Mr Kiernan Looney, Kiernan Looney & Associates (Partnership) v The Commissioners for Her Majesty's Revenue & Customs, TC 06770
| Jurisdiction | UK Non-devolved |
| Judge | Rupert JONES |
| Judgment Date | 16 October 2018 |
| Neutral Citation | [2018] UKFTT 0619 (TC) |
| Respondent | The Commissioners for Her Majesty's Revenue & Customs |
| Appellant | Mr Kiernan Looney, Kiernan Looney & Associates (Partnership) |
| Reference | TC 06770 |
| Court | First-tier Tribunal (Tax Chamber) |
[2018] UKFTT 0619 (TC)
TC06770
Appeal number:
INCOME TAX – CAPITAL GAINS TAX – Partnership - Appeal against
Amendment to Partnership Return for 2009-2010 – Discovery – attribution of
income and turnover to partnership or company – termination payment
trading and revenue receipt or non-taxable capital receipt – appeal against
amendment to self-assessment return for 2011-2012 – capital gains
chargeability - acquisition and disposition of shares – chargeable gain or gift
– calculation of gain – joint interest held by Appellant and wife –
entrepreneurs relief - Appeal against closure notice and amendment to self-
assessment return for 2009-2010
FIRST-TIER TRIBUNAL
TAX CHAMBER
KIERAN LOONEY & ASSOCIATES (PARTNERSHIP)
&
MR KIERAN LOONEY
Appellants
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
Respondents
REVENUE & CUSTOMS
TRIBUNAL:
JUDGE RUPERT JONES
NOEL BARRETT
Sitting in public at Taylor House, London on 16, 17 & 18 July 2018
Nimal Fonseka and R Singh, Senstone Ltd, for the Appellant
Gary Cruddas, Presenting Officer of HM Revenue and Customs, for the
Respondents
© CROWN COPYRIGHT 2018
TC/2014/03430
TC/2016/02331
TC/2016/06173
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DECISION
1. The Tribunal heard three appeals.
2. The two Appellants were Mr Kieran Looney and Mr Looney’s partnership, Kieran
Looney & Associates.
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The issues in the appeals
3. There were three primary questions to be determined by the Tribunal within the
appeals:
In the partnership appeal
a) was £3 million in income from a contract to provide management training services
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to a commodities trading company (Trafigura Beheer BV) in 2009 turnover attributable
to Mr Looney’s partnership (Kieran Looney & Associates) or to his limited company
(Kieran Looney and Co. Ltd)?
b) was the termination payment of £1 million under that contract paid in respect of the
trade, thus a revenue receipt liable to income tax, or compensation paid to acquire a
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secret process or intellectual property rights in Mr Looney’s training methods, thus a
capital receipt or some other form of non-taxable compensation payment?
In the capital gains tax appeal
c) was a payment of US $5 million paid to Mr Looney in January 2012, a gift from a
friend or did it represent the proceeds from the sale of Mr Looney’s interest in shares
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in a company holding land in the Caribbean, thus creating a chargeable gain?
4. There are also subsidiary questions to be determined in the capital gains tax
appeal: did Mr Looney hold a legal or beneficial interest in the shares? should any
chargeable gain be jointly attributed to Mr Looney and his wife? is he entitled to
entrepreneurs’ relief on any gain? what is the proper method of calculating any gain?
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An overview of the appeals
5. The Tribunal heard three appeals of the Appellants against decisions of HMRC, a
fourth having been settled by agreement on the morning of the first day of the hearing.
The Partnership Appeal
6. The first appeal is “the Partnership Appeal” – TC/2014/03430 - in which Kieran
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Looney & Associates (“the KLA Partnership”) was the Appellant. While the original
appeal also concerned accounting period 31 December 2008 (the tax year 5 April 2008
to 5 April 2009 – “2008-2009”) this aspect was settled following agreement reached by
the parties on the morning of the first day of the hearing
7. The remaining part of the Partnership Appeal is against a decision of HMRC of 2
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January 2014 to amend the partnership return for the accounting period ending 31
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December 2009 (tax year 2009-2010) to include £4 million in turnover paid by
Trafigura Beheer BV (“Trafigura”). HMRC say the proper treatment is that the money
is to be attributed as turnover and income of the partnership. HMRC therefore removed
this sum of money paid by Trafigura from the revised accounts of Kieran Looney &
Co. Ltd (“the limited company” or “KLCL”).
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8. HMRC do so on the basis they submit that the payments from Trafigura were
attributable to the partnership rather than the limited company and that £1 million of
the payment, the termination fee, was a revenue receipt on account of the trade of the
partnership and taxable as such rather than a capital payment.
9. HMRC’s decision to include £4 million in turnover for the partnership was upheld
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following an HMRC review on 12 March 2014 which resulted in HMRC amending the
net taxable profit of the partnership to be £1,556,743 (later reduced to £1,469,462). As
a result, HMRC amended Mr Looney’s self-assessment return for 2009-2010 on 2 April
2014 to charge £633,219.88 in Income Tax and National Insurance (later reduced to
£597,417.67).
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10. HMRC’s decision of 12 March 2014 amending the partnership return was
appealed by the Appellant to the Tribunal on 20 May 2014.
The Capital Gains Tax Appeal
11. The second appeal is “the Capital Gains Tax Appeal” – TC/2016/02331 - in which
Kieran Looney was the Appellant.
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12. This is an appeal against HMRC’s amendment to Kieran Looney’s personal self-
assessment return for the tax year 2011-2012 in respect of capital gains tax. On 1 April
2015 HMRC amended Mr Looney’s 2011-2012 self-assessment return to include a
capital gain of £1,127,551, taxed at 28% being £315,714.28 in respect of the sale of
shares in Sandpiper Enterprises Ltd, a Bahamian registered company which owned land
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on the island of Canouan in St Vincent and the Grenadines in the Caribbean.
13. On 16 July 2015 HMRC issued a closure notice and on 28 September 2015 HMRC
upheld the decision that the gain was correctly assessable on Mr Looney and
entrepreneurs’ relief was not due.
14. On 30 November 2015 an appeal was lodged to the Tribunal on behalf of the
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Appellant in relation to the closure notice and amendment to the return for 2011-2012.
The Closure Notice Appeal
15. The third appeal is “the Closure Notice Appeal” – TC/2016/06173 - in which
Kieran Looney was the Appellant. While the original appeal also concerned accounting
period 31 December 2008 (tax year 2008-2009) this part was settled following
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agreement reached by the parties on the morning of the first day of the hearing.
16. The extant part of the Closure Notice Appeal is against HMRC’s decision to issue
a closure notice under section 28A of the Taxes Management Act 1970 in respect of
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