The Commissioners for HMRC v Industria Umbrella LTD
| Judge | JUDGE NATSAI MANYARARA |
| Judgment Date | 30 April 2025 |
| Neutral Citation | [2025] UKFTT 494 (TC) |
| Year | 2025 |
| Court | First-tier Tribunal (Tax Chamber) |
| Date | 30 April 2025 |
Neutral Citation: [2025] UKFTT 00494 (TC)Case Number: TC09503
FIRST-TIER TRIBUNAL
TAX CHAMBER
[Determined on the papers]
Appeal reference: TC/2022/12455
DOTAS – penalty determination – tax avoidance –contractor loan scheme arrangements–
deferral of payment of income tax – might reasonably be expected to enable a tax advantage
– main benefit –notifiable arrangements – promoter’s obligation – the informed observer –
objective test – Finance Act 2004 –theTax Avoidance Schemes (Prescribed Descriptions of
Arrangements) Regulations 2006 SI 2006/1543 – the hallmarks of prescribed arrangements –
whether arrangements notifiable –yes– whether there was a failure to notify the
arrangements– yes – application for penalties under s 98C of the Taxes Management Act
1970 for the failure to notify the arrangements –whether reasonable excuse established – no
Heard on: 24 to 27 March 2025
Judgment date: 30 April 2025
Before
JUDGE NATSAI MANYARARA
Between
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Applicants
and
INDUSTRIA UMBRELLA LTD (IN LIQUIDATION)
Respondent
The Tribunal determined the appeal on 24 to 27 March 2025, without a hearing, under the
provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules
2009 having considered: (i) the Hearing Bundle consisting of 624 pages; (ii) the Authorities
Bundle consisting of 775 pages: and (iii) HMRC’s skeleton argument dated 10 March 2025.
DECISION
INTRODUCTION
1.This case concerns the disclosure of tax avoidance schemes (“DOTAS”) provisions set
out in Part 7 of the Finance Act 2004 (“FA 2004”), and regulations made thereunder (the Tax
Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006 SI
2006/1543, as amended) (“the Prescribed Descriptions Regulations”)1.
2.The Applicants (“HMRC”) submit that between 2017-18 and 2019-20, the Respondent
(“Industria”) promoted contractor loan scheme arrangements, which enabled participants to
take home a higher net return of their contract value due to the fact that only a portion of their
contract value was paid through the payroll (and subject to deductions of tax and national
insurance contributions (“NICs”)). The arrangements (“the Industria Arrangements”) were
designed to allow users to provide contractor services to arm’s length end-user clients, whilst
retaining more money than they would as anemployee, a self-employed individual or a
director of their own company. The arrangements sought to avoid income tax on
remuneration for services and/or reduce PAYE and NICs in relation to the scheme’s users by
making payments to users in the form of:
(1)salary payments amounting to the National Minimum Wage (“NMW”); and
(2)a ‘loan’ (“the loan”).
3.The arrangements further purported to allow users to take home approximately 80% of
their gross contract pay; the large majority of which was received pursuant to the ‘loan
agreements’.
4.Bya letter dated 15 April 2021, HMRCexplained that absent agreement that the
Industria Arrangements were notifiable under the DOTAS legislation, HMRC’s intention was
to apply to theTribunal for penalties under s 98C ofthe Taxes Management Act1970
(“TMA”) for the failure to notify these arrangements (“the Penalty Application”). By virtue
of s 100 TMA, HMRC do not have the power to impose a penalty under s 98C(1)(a). Instead,
pursuant to s 100C TMA, HMRC must make an application to the Tribunal.
5.This is HMRC’s application for an order, under s 100C TMA, for a penalty under s 98C
TMA in relation to Industria’s failure to comply with the requirement under s 308(3) FA
2004 to notify the notifiable arrangements to HMRC within the prescribed period, after the
date on which Industria first became aware of any transactions forming the notifiable
arrangements. Section 308(3) FA 2004 requires a promoter in relation to notifiable
arrangements to provide the “prescribed information2”relating to those arrangements within
the “prescribed period3”after the date on which they first became aware of any transaction
forming part of the notifiable arrangements.
1 Reference to the Prescribed Descriptions Regulations are to the version that was in force at the time of the
arrangements in issue in these proceedings (during the 2017-18 tax year).
2Paragraph 4(1) of the Tax Avoidance Schemes (Information) Regulations 2012 sets out the “prescribed
information” which a promoter must provide under section 308(3) as being “sufficient information as might
reasonably be expected to enable an officer of HMRC to understand the manner in which the proposal or
arrangements are intended to operate”, including the promoter’s name and address, the provisions by which the
arrangements are notifiable, a summary of the arrangements, information explaining each element from which
the tax advantage expected under those arrangements arises, and the statutory provisions on which that tax
advantage is based.
3 Paragraph 5(5) of the Tax Avoidance Schemes (Information) Regulations 2012 defines the “prescribed period”
for notification under section 308(3) as “the period of 5 days beginning on the day after that on which the
promoter first becomes aware of any transactions forming part of the arrangements to which that subsection
applies.” Regulation 2(3) of the Information Regulations requires that, in reckoning this period, any day which
is a non-business day within the meaning of section 92 Bills of Exchange Act 1882 shall be disregarded.
1
6.As Industria entered into creditors’ voluntary liquidation on 28 May 2021, HMRC
served the Penalty Application on Mr Edward M Avery-Gee and Mr Daniel Richardson of
CG& Co (“the Liquidators”). By an emaildated 29 November 2023, the Liquidators
informed the Tribunal that they do not wish to contest or appeal the action being taken by
HMRC.
7.On 21 February 2025, the Tribunal directedthat the Penalty Application would be
determined on the papers.
8.Neither party has requested an oral hearing.
AUTHORITIESANDDOCUMENTS
9.The authorities specifically referred to in the application included:
(1) HMRC v Root2Tax Limited [2017] UKFTT 696 (TC) (‘Root2Tax’);
(2) R (oao Root2Tax Limited) [2018] EWHC 1254 (Admin) (‘Root2Tax (HC)’);
(3) HMRC v Hyrax Resourcing Ltd & Ors [2019] UKFTT 175 (TC) (‘Hyrax’);
(4) HMRC v EDF Tax Ltd [2019] UKFTT 598 (TC) (‘EDF Tax’);
(5) HMRC v Curzon Capital Limited [2019] UKFTT 63 (TC) (‘Curzon Capital’);
(6) HMRC v Opus Bestpay Ltd [2020] UKFTT 408 (TC) (‘Opus Bestpay’);
(7) HMRC v White Collar Financial Ltd [2020] UKFTT 459 (TC) (‘White Collar
Financial’);
(8) HMRC v Premiere Picture Ltd [2021] UKFTT 58 (TC) (‘Premier Picture’)
(9) HMRC v Redbox Tax Associates LLP [2021] UKFTT 293 (TC) (‘Redbot Tax’);
(10) HMRC v Smartpay [2022] UKFTT 146 (TC) (‘Smartpay’);
(11) HMRC v AML Tax (UK) Ltd [2022] UKFTT 00114 (TC) (‘AML Tax’);
(12) HMRC v AML Tax (UK) Ltd & Denmedical UK Ltd [2022] UKFTT 174 (‘AML
Tax (UK) Ltd & Anor’);
(13) HMRC v Hyrax Resourcing Ltd (No 2) [2022] UKFTT 218 (TC) (‘Hyrax (No.
2)’);
(14) Greenwich Contracts Ltd v HMRC [2023] UKFTT 874 (TC) (‘Greenwich
Contracts’);
(15) HMRC v IPS Progression Ltd [2024] UKFTT 136 (TC) (‘IPS Progression’); and
(16) Countrywide Partners v HMRC[2024] UKFTT 323 (TC) (‘Countrywide
Partners’).
10.The documents for the hearing comprised of pleadings, documents relating to the
Industria Arrangements, witness statements and other correspondence.
ISSUES
11.The issues for consideration are:
(1)Whether the Industria Arrangements were notifiable;
(2)Whether Industria failed to notify those arrangements;
(3)If so, whether Industria had a reasonable excuse for non-compliance within the
meaning of s 118(2) TMA; and
(4)If not, what the quantum of the penalty is.
2
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