Anston Investments Limited v The Commissioners for HMRC

Paragraphs 41 et seq. of Schedule 18 to the FA 1998 permit the Respondents to issue an assessment to corporation tax if, inter alia, one of their officers discovers that, as regards an accounting period of a company, an excessive relief has been given to the company in one of the circumstances specified in paragraphs 43 or 44 of Schedule 18 to the FA 1998 so that there has been a loss of tax.

Even if the circumstance specified in one of those paragraphs exists and there has been a loss of tax, paragraph 46 of Schedule 18 to the FA 1998 imposes time limits for the issue of any such assessment.

The general rule is that a discovery assessment cannot be made more than four years after the end of the accounting period to which it relates. In this case, the assessment in respect of the 2018 AP was made on 29 September 2022 and was therefore within that four-year time limit.

However, the assessments in respect of the 2016 AP and the 2017 AP, which were made on 19 December 2022, were outside that four-year time limit. Nevertheless, paragraph 46(2) of Schedule 18 to the FA 1998 extends the time limit for making a discovery assessment to six years after the end of the relevant accounting period where the loss of tax in question was brought about carelessly by the company in question or a person acting on its behalf. Consequently, the assessments in respect of each of those two accounting periods are valid only if the Appellant (or a person acting on behalf of the Appellant) was careless in treating the donations made to Clydpride in the relevant accounting period as qualifying charitable donations and that carelessness led to the loss of tax in question.

In Chapter 1 of Part 6 of the CTA 2010:

Section 191, which is within Chapter 2 of Part 6 of the CTA 2010, then sets out six conditions which a donation needs to satisfy if it is to be a qualifying payment. It is common ground that the donations to which this appeal relates satisfied five of the six conditions. The only condition over which there is a dispute is Condition D in Section 191(5), which provides as follows:

Condition D is that the payment is not disqualified under section 193 (associated acquisition etc by the charity).”

The fact that the terms of Condition D are set out in Section 193 is why I have described the second issue in the appeal as the “193 Issue”.

Section 193 provides as follows:

A payment is disqualified under this section if—

it is conditional on an acquisition of property by the charity from the company or a person associated with the company,

it is associated with such an acquisition, or

it is part of an arrangement involving such an acquisition.

An acquisition by way of gift is to be ignored for the purposes of this section.”

It can be seen that the section requires, inter alia, the persons who are “associated” with the paying company to be identified.

To that end, Section 201 provides as follows:

the company, or

a person connected with the company.”

Since Section 201 defines a person who is “associated” with the company by reference to connection, and there is no definition of connection within Part 6 of the CTA 2010 itself, the general definition set out in Sections 1122 and 1123 applies. These sections, in turn, depend on the definition of “control” in Sections 450 and 451 and related definitional provisions.

I have set out the relevant legislation in full in Appendix Two to this decision.

The evidence at the hearing took the form of various documents and the witness evidence of LF and Officer Darren Macdonald of the Respondents. As it transpired, the witness evidence of Officer Macdonald was not relevant to any of the matters in dispute in connection with either of the two issues and therefore I will not summarise it in this decision.

I was provided with the following documentary evidence:

LF is a man of advanced years and somewhat hard of hearing. In addition, many of the events to which LF’s evidence related had occurred a considerable number of years ago. Together, these features meant that the process of obtaining LF’s evidence was not entirely straightforward. However, I considered LF to be an honest and credible witness and have relied on that evidence and the documentary record in reaching my findings of fact below.

The salient points arising out of LF’s evidence were as follows:

In addition to the facts set out in paragraphs 4 and 5 above, which are common ground, I make the following findings of fact for the purposes of this decision, in each case for the reason indicated:

As I will go on to describe, the parties found that there were quite a number of issues in relation to which they did not agree. I would normally deal, in turn, with each of the issues in dispute before ultimately reaching my overall conclusion in relation to the appeal on the basis of my conclusions in relation to those issues. However, in this decision, I am going to depart from that convention because I consider that the answer in this case is plain without my needing to reach a view in relation to most of the disputed issues.

I will start by observing that, in my view, the Respondents have not properly understood the legal and commercial reality of the transactions which have occurred. In particular, they have:

Taken together, the above points mean that the Respondents have erroneously formed the view that transactions which were intended to benefit, and did actually benefit, only Clydpride (and the charitable activities of Clydpride) were transactions which were designed to benefit Venerate and, indirectly, the Jersey Trusts.

I would elaborate on the above view as follows.

Based on the facts described in paragraphs 4 and 5 above and my findings of fact in paragraph 27 above, the legal and commercial reality of the transactions which occurred is as follows.

For a number of years, subject to exceptions in accounting periods in which the Appellant wished to retain an amount equal to some of its PDTPs for working capital purposes, the practice of the Appellant was to donate an amount equal to all of its PDTPs in each accounting period to Clydpride.

By the time that the sale of the Newcom shares was in contemplation, the Faust family had determined that they no longer wished to continue to hold the Newcom group through Venerate and that, subject to Venerate’s retaining an amount equal to the then-current market value of the Newcom group, they were content for all of the future growth in value of the Newcom group to be for the benefit of Clydpride. It was for that reason that Venerate and Clydpride entered into the SPA on terms that, in return for the transfer of the Newcom shares, Clydpride would pay to Venerate an amount equal to the then-current market value of the Newcom group.

Just pausing there, this was a generous act on the part of the Faust family, generosity which they compounded by allowing most of the consideration owed by Clydpride to Venerate pursuant to the SPA to remain outstanding without demanding interest. The only condition which they imposed was that, as and when a property which was held by the Newcom group at the time when the SPA was executed was sold, part of the deferred consideration owed by Clydpride to Venerate would be paid. That amount would be equal to fifty per cent. of the Net Sale Proceeds realised in relation to the relevant property.

Quite separately from the change in ownership of the Newcom group described in paragraph 34 above, when that change in ownership occurred, the practice I have described in paragraph 33 above continued. In other words, the Appellant continued to make a donation to Clydpride in each accounting period in an amount equal to all of the Appellant’s PDTPs in the relevant accounting period. (In passing, I should say that, in my experience, it is not uncommon for the trading subsidiaries of charities to follow this practice in relation to their taxable trading profits. In giving his evidence, LF described the practice as “lawful tax avoidance”. I would go somewhat further and describe it as perfectly legitimate and appropriate tax planning using a relief for which the legislation expressly provides.)

The table set out in paragraph 24(12) above bears out the analysis described above. It can be seen that, not only was there a significant donation to Clydpride by the Appellant in its accounting period ended 24 March 2011 – which preceded the acquisition of the Newcom shares by Clydpride – but also that:

Indeed, the table I have mentioned in the above paragraph reveals that, in three of the accounting periods after the acquisition of the Newcom shares by Clydpride – the accounting period ended 24 December 2013, the 2016 AP and the accounting period ended 24 December 2019 – the amount of deferred consideration paid by Clydpride considerably exceeded the donation made to Clydpride by the Appellant. In other words, those were accounting periods in which the PDTPs of the Appellant in that accounting period were lower than fifty per cent. of the Net Sale Proceeds realised by the Appellant in relation to the properties sold in that accounting period. It follows from this that, in my view, if the Appellant had made PDTPs of nil (or a tax loss) in any accounting period in which it realised Net Sale Proceeds in relation to one or more properties that it had sold in that accounting period, it would have made no donation to Clydpride in the relevant accounting period whereas Clydpride would still have been required to pay to Venerate, by way of discharging the deferred consideration, an amount equal to fifty per cent. of the Net Sale Proceeds in relation to those properties which the Appellant had sold in the relevant accounting period.

At the hearing, Miss Hughes, on behalf of the Respondents, described the statement I have just made as pure speculation and a conclusion which I was not entitled to draw. I disagree. It is absolutely plain from the evidence I have described that the quantum of the donations made by the Appellant to Clydpride in each accounting period was dictated by, and solely by, the Appellant’s PDTPs in that accounting period and not by the, quite separate, figure determined by reference to the Net Sale Proceeds in relation to the properties which were sold by the Appellant in that accounting period.

It is true that, in terms of cash, Clydpride used the donations which it received from the Appellant to make the payments that became due to Venerate under the SPA. However, Clydpride was not in any way economically dependent on those donations in order to do so. Clydpride was, at the time when the relevant donations were made, and remains, a substantial entity which holds significant assets other than cash. It could have chosen to pay the deferred consideration out of the proceeds of realising some of its investments other than the Newcom shares or the proceeds of a borrowing from a third-party bank secured by those investments. It was entirely free to manage its assets and liabilities in whatever manner it decided, subject only to the constraints of law.

Having said all of that, I do not think that the way in which Venerate and Clydpride chose to express the obligation on Clydpride to pay the deferred consideration in Schedule 7 to the SPA was particularly clear or consistent with the legal and commercial reality of the transaction which I have just described. The relevant language said as follows:

The problem with this drafting is that it entirely disregards the legal and commercial reality that Clydpride (the Buyer) was a totally different legal entity from each member of the Newcom group that Clydpride was acquiring and therefore did not itself hold the properties to which reference was made. Consequently, Clydpride itself could never receive the proceeds of selling any of those properties. Whilst the commercial intention of the drafting is plain – it is that Clydpride would be entitled to procure that a member of the Newcom group sold a property provided that the sale was at market value and Clydpride discharged such part of the deferred consideration as was equal to fifty per cent. of the Net Sale Proceeds arising in relation to the property that was sold, the way in which the drafting elided Clydpride and the Newcom group might have been taken to suggest that what Clydpride was required to pay to Venerate by way of deferred consideration was not an amount equal to fifty per cent. of the relevant Net Sale Proceeds but rather fifty per cent. of the actual relevant Net Sale Proceeds themselves. As I have already said, this was an impossibility because Clydpride was never going to receive the actual relevant Net Sale Proceeds themselves. It was only ever going to be able to receive an amount equal to the relevant Net Sale Proceeds from the member of the Newcom group which had sold the property in question. As a result, the payment which Clydpride was required to make to Venerate by way of deferred consideration could never be fifty per cent of the actual relevant Net Sale Proceeds themselves.

I do not think that the inelegant drafting to which I have referred in paragraphs 41 and 42 above changes the legal and commercial reality of what occurred in any way. It remains the case that Clydpride could only ever pay to Venerate an amount equal to fifty per cent. of the relevant Net Sale Proceeds and not fifty per cent. of the actual relevant Net Sale Proceeds themselves. It therefore does not affect the conclusions I have drawn as to the legal and commercial reality of the transactions in question. However, I can see that it might perhaps have contributed to the error which the Respondents have made in their analysis of those transactions.

Having described the legal and commercial reality of the relevant transactions as I see it, I now turn to the linked questions of whether any of the donations made by the Appellant in the relevant accounting periods can properly be said to have been either:

It can be seen that, in setting out those questions in the way I have, I have assumed for the moment that Venerate was a person “associated” with the Appellant for the purposes of Section 201 at all times – an assumption that, as I will go on to address, I consider to be correct from the technical perspective. In passing, I should add that this was not the Appellant’s strongest point as, whatever the technical merits of Mr Firth’s submissions on the subject, the finding of fact that I have made in paragraph 27(1) above (and the reason for that finding) suggest that Clydpride was at all relevant times the Faust family’s charity and therefore intimately connected to the Faust family and Venerate. In fact, this appears to have been accepted by LF because, if it had not been the case:

Returning to the two questions set out at paragraph 44 above, I should observe that there was considerable debate between the parties at the hearing as to the precise meaning of the words “arrangement” and “associated” in this context and that, in answering each of the questions, I propose to adopt the wide interpretation of those words which was advanced by Miss Hughes at the hearing in order to consider the Respondents’ case at its strongest.

I start by addressing the question of whether any of the donations made by the Appellant in the relevant accounting periods can properly be said to have been paid as “part of an arrangement” involving the acquisition of the Newcom shares by Clydpride. In this context, as I have just indicated, I propose to adopt the wide definition of “arrangement” proposed by Miss Hughes, which is the one given by Lord Walker in Jones v Garnett [2007] 1 WLR 2030 (“Garnett”) at paragraphs [47] to [50]. This reveals that:

However, the fact that the word “arrangement” has a wide meaning is ultimately not relevant in this case because the question is not whether there was an “arrangement” involving the acquisition of the Newcom shares – there clearly was – but rather whether the donations made by the Appellant to Clydpride were part of that “arrangement”. Given my view of the legal and commercial reality of the transactions in this case, as described in paragraphs 29 to 43 above, it is plain to me that they were not. With the exception of those accounting periods prior to the execution of the SPA in which the Appellant retained an amount equal to some of its PDTPs for working capital purposes, as noted by LF in his letter to the Charity Commissioners set out at paragraph 24(3) above, the Appellant donated an amount equal to all of its PDTPs to Clydpride both before and after it became a subsidiary of Clydpride. The acquisition therefore had absolutely no impact upon, or relevance to, the donations made by the Appellant to Clydpride. I therefore fail to see how those donations can properly be described as being paid as part of the “arrangement” involving the acquisition of the Newcom shares by Clydpride.

Putting it another way, there were effectively two “arrangements” in this case – one “arrangement” involving the acquisition of the Newcom shares by Clydpride and another, quite separate, “arrangement” involving ongoing donations by the Appellant to Clydpride in an amount equal to all of the Appellant’s PDTPs in each accounting period. The payments of deferred consideration were part of the former “arrangement” but the ongoing donations by the Appellant to Clydpride were not.

Turning then to address the question of whether any of the donations made by the Appellant in the relevant accounting periods can properly be said to have been “associated” with the acquisition of the Newcom shares by Clydpride, as I did in relation to the word “arrangement”, I propose to adopt the broad definition of the word “associated” proposed by Miss Hughes. The First-tier Tribunal (the “FTT”) in John Harvey v The Commissioners for His Majesty’s Revenue and Customs [2024] UKFTT 001098 (TC) (“Harvey”), which related to the equivalent income tax legislation, held at paragraph [230] that the word “associated” is an ordinary English word and should be construed broadly.

I therefore propose to construe the word “associated” in its broadest sense as meaning “connected with or related to”.

So, were any of the donations made by the Appellant to Clydpride in the relevant accounting periods “connected with or related to” the acquisition of the Newcom shares by Clydpride?

At first blush, the Respondents appear to be on slightly stronger ground in relation to this contention than in relation to their contention that the donations were paid as “part of an arrangement” involving the acquisition of the Newcom shares by Clydpride. After all, as it transpired, Clydpride used the cash which it received from the Appellant by way of the donations to pay the deferred consideration to Venerate and the deferred consideration was in return for the acquisition of the Newcom shares by Clydpride. I have therefore considered whether this use of the cash by Clydpride might fairly be said to have created an “association” between the donations and the acquisition of the Newcom shares for the purposes of Section 193(1)(b).

Although that argument is superficially attractive, I am not at all persuaded that it did. As I have already noted in discussing the legal and commercial reality of the transactions which took place, there was absolutely no causative connection between the donation in each accounting period – which was solely a function of the PDTPs of the Appellant in that accounting period and would have been paid even if Clydpride had not acquired the Newcom shares – and the acquisition of the Newcom shares by Clydpride.

Of course, there was a causative connection between the acquisition of the Newcom shares by Clydpride and the payments of deferred consideration paid by Clydpride to Venerate but the mere fact that Clydpride happened to use the cash which had been generated by the donations to pay the deferred consideration as opposed to cash generated from other sources is not enough, in my view, to give rise to an “association” between the donations that had given rise to that cash in the hands of Clydpride and the acquisition of the Newcom shares. There was no causative relationship or connection between the two matters and the two matters were entirely unrelated and unconnected. Putting it another way, the cash which Clydpride had at its disposal as a result of receiving the donations was not the same as the donations themselves. Clydpride could easily have generated cash from an alternative source and the fact that it chose not to do that did not give rise to a connection between the donations by which it obtained the cash and the acquisition of the Newsom shares.

In effect, both potential challenges by the Respondents founder on the fact that the donations by the Appellant were totally unrelated to the acquisition of the Newcom shares by Clydpride. They were part of a pattern of conduct which preceded that acquisition and were solely a function of the Appellant’s PDTPs in the accounting period in which each donation was made.

The mere fact that, in a particular accounting period, the Net Sale Proceeds in relation to the properties sold by the Appellant in that accounting period (which triggered the requirement to pay part of the deferred consideration for the Newcom shares) may have been a factor in the calculation of the Appellant’s PDTPs in that accounting period is neither here nor there. The donation in that accounting period had an entirely different cause and measure from the cause and measure of the payments of deferred consideration. As I have already observed in paragraph 38 above, it was perfectly possible that the Appellant’s PDTPs in a particular accounting period could end up being less than fifty per cent. of the Net Sale Proceeds in relation to the properties sold in that accounting period so that the donation in that accounting period was less than the payment of deferred consideration triggered by the sale of the relevant properties.

Similarly, the mere fact that Clydpride chose to use the cash which it held as a result of receiving the donations, as opposed to cash generated by realising (or borrowing against the security of) one of its investments, may have connected the cash itself to the acquisition of the Newcom shares by Clydpride but that did not connect the donations which gave rise to the cash to that acquisition.

For the reasons set out above, I consider that the Respondents’ case in this instance has no merit from the technical perspective.

I also think that it lacks merit in terms of fairness and justice.

In my opinion, it is entirely misconceived to consider that the benefit of any of the donations made by the Appellant to Clydpride were somehow “enjoyed” by Venerate or the Jersey Trusts or, as Miss Hughes put it at the hearing, “destined in part to fund Venerate and thus [LF’s] family trust”. The mere fact that the cash arising from the donations was used to pay the deferred consideration did not mean that the donations were not being used exclusively for the charitable purposes of Clydpride for the simple reason that the deferred consideration became due to Venerate only as a result of the receipt by Clydpride of consideration from Venerate under the SPA – in the form of the Newcom shares – that was equal in value to the consideration which Clydpride became obliged to pay to Venerate. Indeed, Venerate’s willingness to leave most of the consideration outstanding for a lengthy period without claiming interest on the amount outstanding from time to time meant that the effect of the SPA was such that value actually passed from Venerate to Clydpride as a result of the SPA. Consequently, the result of the transaction was, in fact, that Venerate actually gave to Clydpride more value than it received from Clydpride. In my view, to regard the SPA as giving rise to the passing of value from Clydpride to Venerate and, through Venerate, to the Jersey Trusts is simply wrong.

I do not really understand why the Respondents have chosen to challenge the deductibility of donations which did not involve tax avoidance and have so clearly been used exclusively to benefit the charitable sector.

For the reasons set out above, I consider that the Appellant is entitled to succeed in relation to the 193 Issue.

That conclusion has the effect that the Appellant is also entitled to succeed in relation to the Discovery Issue because, even if the failure by the Appellant to obtain tax advice on the deductibility of the donations as qualifying charitable donations was “careless”, it follows from the conclusion I have reached above that no loss of tax has arisen as a result of that failure. The absence of a loss of tax resulting from any alleged carelessness is fatal to the Respondents’ case on the Discovery Issue.

As it happens, I do not consider that the failure by the Appellant to obtain tax advice in this case was careless.

In that regard, it was common ground that:

However, the parties disagreed on the question of whether a prudent and reasonable taxpayer in the position of the Appellant would have considered it appropriate to take tax advice before claiming the relief.

Mr Firth’s position was that there was no reason in this case for a reasonable taxpayer to have considered that tax advice was necessary, because the Appellant had been making donations in an amount equal to all of its PDTPs to Clydpride for many years. In contrast, Miss Hughes said that a reasonable taxpayer would have considered it appropriate to take tax advice because of the size of the donations and the involvement in the transactions of Venerate and the Jersey Trusts.

I am inclined to agree with Mr Firth on this point. In truth, the disagreement between the parties in relation to carelessness is simply another reflection of the parties’ widely-divergent respective understandings of the nature of the transactions which have occurred. Whilst the Respondents see the donations as forming part of an arrangement designed to benefit a Jersey resident company (Venerate) and two Jersey resident trusts (the Jersey Trusts) – which inevitably suggests that a prudent and reasonable taxpayer would have taken tax advice in relation to the ability to claim relief for the donations – as far as the Appellant was concerned, it had been making donations to Clydpride in an amount equal to all of its PDTPs for many years and claiming relief for the donations as qualifying charitable donations so that nothing was changing as a result of the change in ownership of the Newcom group. Since I have already indicated above that I agree with the Appellant’s understanding of the transactions, it is not surprising that I have reached the conclusion that it was reasonable for the Appellant to assume that it could continue to claim relief for its donations notwithstanding the change in ownership of the Newcom group and that no tax advice was necessary.

The above means that, in my view:

I therefore uphold the Appellant’s appeal.

The above is sufficient to dispose of the appeal but, because Mr Firth raised a number of points in relation to the proper construction and application of Section 193 in this case, and I heard lengthy submissions from both parties in relation to those points, I will now go on to set out below my conclusions in relation to those of Mr Firth’s points which have not been rendered redundant by the assumptions I have made above in order to put the Respondents’ case in the appeal at its strongest – in other words, my adoption of a broad construction of the words “arrangement” and “associated” in Section 193.

Turning then to Mr Firth’s other points, the first related to the scope of the Relevant Provisions when they were construed purposively.

In order to address this submission, I should explain that, before the consolidation in 2010, the legislation which became the Relevant Provisions was to be found in Section 339 of the Income and Corporation Taxes Act 1988 (the “ICTA 1988”). More specifically, it was in Section 339(3E) of ICTA 1988, which was one of the amendments made to Section 339 of the ICTA 1988 by Section 26 of the Finance Act 1990 (the “FA 1990”).

Section 26 of the FA 1990:

Section 339(3E) of the ICTA 1988 was the provision which became the Relevant Provisions on consolidation. For completeness, I would note that, before that consolidation, in 2006, the limitations set out in both Section 339(3B) and Section 339(3E) of the ICTA 1988 were extended to apply to all companies and not just close companies, by Section 58 of the Finance Act 2006.

Mr Firth submitted that:

I agree with the first three of the above submissions.

The Relevant Provisions do need to be construed on a purposive basis and, in doing that:

However, I do not see anything in the secondary material applicable in this case which supports the three remaining submissions.

It is true that that secondary material reveals that, when enacting Section 26 of the FA 1990, Parliament was concerned to make it clear that the donations referred to in Section 339 of the ICTA 1988 were donations in cash and not in kind. That was why the words “of a sum of money” were inserted into Section 339(1) of the ICTA 1988. However, the mere fact that Parliament was intending to limit relief to donations which were made in cash says nothing whatsoever about Parliament’s purpose in enacting Section 339(3E) of the ICTA 1988. Instead, when that provision is read in context, and in the light of the statement in Parliament that it is part of measures which are designed to prevent tax avoidance, it is plain that, in the context of a donation by a close company, Parliament was intending to limit relief to a cash donation which was made without any ulterior use or purpose beyond the donation itself.

Hence, in relation to a payment by a close company, Section 339(3B)(a) of the ICTA 1988 precluded relief for a payment which was subject to a condition as to repayment, Section 339(3B)(b) of the ICTA 1988 precluded relief for a payment where the paying company or a person connected with it received a benefit in consequence of the payment of more than a de minimis amount and Section 339(3E) of the ICTA 1988 precluded relief for a payment where the payment was conditional on, or associated with, or part of an arrangement involving, the acquisition of property by the charity from the paying company or a person connected with the paying company, other than by way of gift.

In fact, it seems to me from the extract from Hansard to which I was directed at the hearing that, in enacting these provisions, there may have been some confusion within Parliament as to whether Section 339(3E) of the ICTA 1988 was aimed at disqualifying a donation linked to an acquisition of property by the charity from the paying company or a person connected with the paying company or vice versa. I say that because the example given by the Economic Secretary to the Treasury (Mr Richard Ryder) when introducing the legislation made reference to a disposal of property by the relevant charity to the paying company as opposed to an acquisition of property by the relevant charity from the paying company or a person connected with the paying company. Mr Ryder said as follows:

I think this is instructive because it strongly suggests that the purpose of Parliament in enacting the provision had nothing whatsoever to do with ensuring that only donations in cash fell within the scheme. After all, had that been the case, then Mr Ryder would have got the disponor and the acquiror the right way around in the example he gave. Instead, it is plain that his focus was on ensuring that only donations which were not linked to a transfer of property between the charity and the paying company or a person connected with the paying company qualified for relief. As stated by Mr Ryder, the aim was clearly to avoid complications creeping into an otherwise straightforward scheme for giving relief for cash donations.

I do not think that it advances the debate in relation to construction to say that, as so construed, there might well have been circumstances falling within Section 339(3E) of the ICTA 1988 that did not involve tax avoidance. Nor does it advance that debate to say that, as so construed, there might well have been circumstances involving a payment linked to the acquisition of property by the charity that fell outside Section 339(3E) of the ICTA 1988. The fact is that the debate recorded in Hansard suggests that Parliament identified that a donation which was linked to the transfer of property between the charity and the paying company or a person connected with the paying company might give rise to an inappropriate advantage and ruled such donations out of the scheme to the extent that the transfer of property in question was to the charity and not by the charity.

In short, I broadly agree with the FTT in Harvey – which was addressing the equivalent legislation in the income tax legislation – when it said at paragraphs [222] to [225], that:

For the above reasons, I consider that the purposive construction of the Relevant Provisions is that they prevent relief from being claimed for a cash donation which is made in any of the circumstances described in Section 193, regardless of whether or not, in a particular case, the relevant circumstances have given rise to tax avoidance or involve dressing up what is in substance a donation in kind as a cash donation.

Mr Firth’s second point was that, on a proper construction of the language used in the legislation, where the person disposing of the property to the charity was a person associated with the donor, it was not sufficient that that association existed. Instead, the association between the property transferor and the donor needed to be part of the arrangement. Although he initially denied that this was the same as saying that the donor needed to be aware of the association at the time of making its donation, he subsequently accepted that the two were effectively the same because it was impossible for the association to be part of the arrangement unless the donor was aware of the association.

I can see no basis for this interpretation of Section 193(1)(c) given the manner in which Section 193 as a whole is laid out.

Section 193(1)(a) applies to a donation which is conditional on an acquisition of property by the charity from the donor or a person associated with the donor. Likewise, Section 193(1)(b), when construed in line with the section preceding it, to which it expressly refers, applies to a donation which is associated with an acquisition of property by the charity from the donor or a person associated with the donor. The section simply refers to “such an acquisition”, which means that it requires the reader to read the section as referring to the type of acquisition mentioned in the previous section. In each case, therefore, the applicability or otherwise of the relevant section turns on:

When one then turns to Section 193(1)(c), it is notable that it uses precisely the same formulation as the one used in Section 193(1)(b). In other words, the applicability or otherwise of the section turns on:

There is no indication in the manner in which the section is set out and when that is read in the light of the two previous sections that the fact that the transferor of property in question was the donor or a person associated with the donor needs to have been one of the terms of the arrangement. There merely needs to have been an acquisition of the relevant kind falling within the same arrangement as the donation. To say otherwise would be to introduce an unwarranted element of subjectivity into a test that is wholly objective. An attempt to do something similar in relation to legislation imposing tax on loans received “in connection with” employment failed in the Court of Appeal (the “CA”) in The Commissioners for His Majesty’s Revenue and Customs v Marlborough DP Ltd [2025] EWCA Civ 796. It was held that the legislation in question imposed an objective test and there was no basis for reading it as if it included a causative element. I think that the same applies here.

Mr Firth’s third point related to the time at which the association between the donor and person making the property transfer needed to be tested in the context of the Relevant Provisions. In his view, this had to be at a single point in time. He said that the approach advocated by Miss Hughes – which was that the test needed to be applied on an ongoing basis over a period of time – was unworkable and there was no authority for it in the language of the Relevant Provisions. In this regard, Mr Firth contrasted the language used in the tainted donation provisions in Section 939C – which expressly required the question of whether a person was connected to the donor to be determined at one of a number of specifically-identified “relevant times” – with the absence of any such equivalent approach in the Relevant Provisions.

He went on to say that, given that the association had to be tested at a single point in time, there were only two candidates:

I agree with Mr Firth that, given the absence of an express reference to “relevant times” such as appears in the tainted donation provisions, the language used in the Relevant Provisions is not apt to suggest that the existence of an association between the donor and the property transferor can be tested over a period of time. Instead, I agree that the question needs to be considered at a single point in time.

However, I disagree with Mr Firth in relation to the identity of that single point in time because, on my reading of the legislation, that is most naturally the moment at which the relevant property transfer is made and not the moment when the relevant donation is made. My reason for saying that is that it is the acquisition of the property from the donor or a person associated with the donor which brings the section into play in relation to a donation. It is at that moment that consideration needs to be given to the potential application of the provision and that is the mischief at which the provision is aimed. It therefore seems to me to be most logical for the association between the donor and the property transferor to be tested at the point when the relevant acquisition is made and it becomes necessary to consider whether the section applies.

I would add that this reasoning is also entirely consistent with the way I have approached Mr Firth’s second point in paragraphs 88 to 91 above. As I have noted in that context, in each of the three sections, it is necessary first to identify an acquisition of property from the donor or a person associated with the donor and then to ask if the donation was conditional on, associated with, or part of an arrangement involving, that acquisition. It is therefore entirely appropriate to test for association at the point of the acquisition rather than at the time the relevant donation is made.

It follows that, in my view, in the present case, whether or not the Newcom shares were acquired by Clydpride from a person associated with the Appellant needs to be tested at the point when the SPA was executed and not at each (later) date when a donation was made.

I note that, although the decision in Kellogg Brown & Root Holdings (UK) Ltd v The Commissioners for Her Majesty’s Revenue and Customs [2010] EWCA Civ 118 (“Kellogg Brown”) was dealing with a slightly different issue – namely, whether connection for the purposes of Section 18 of the Taxation of Chargeable Gains Act 1992 should be determined at the time of the disposal agreement or the time when the disposal agreement becomes unconditional – this conclusion is entirely consistent with the reasoning adopted by the CA in that case at paragraphs [22] to [24].

In reaching this conclusion, I recognise that there might be an unusual situation where an arrangement is such that the property acquisition does not occur until a considerable period of time after the relevant donation has been made. However, I do not think that that unlikely possibility should negate what I consider to be the much more natural reading of the legislation. It certainly does not mean that that more natural reading should be discarded on the basis that it produces absurdity. In the vast majority of cases, if there is an arrangement involving a donation and an acquisition of property by the charity, then those two events are likely to be quite proximate. At the very least, if the acquisition of the property is planned to occur a long time after the donation has been made, the donor is highly likely to be aware, at the point of making the donation, that there might be a connection between it and the property transferor when the acquisition by the charity occurs.

In short, as Lord Sales put it in PACCAR at paragraph [43], a court should not “rely on the presumption against absurdity in order to substitute their view of what is reasonable for the policy chosen by the legislature, which may be reasonable in its own estimation”. In this case, it is not at all unreasonable for Parliament to have enacted a provision which required association to be tested when the property acquisition was made and this, in my view, is what Parliament has done.

Mr Firth’s fourth point was actually a number of different points, all of them relating to the question of whether, on the facts in this case, Venerate was associated with the Appellant on and after the execution of the SPA. Mr Firth accepted that, prior to the execution of the SPA, Venerate and the Appellant were associated because the Appellant was Venerate’s 100% indirect subsidiary. However, he submitted that the connection between Venerate and the Appellant ceased at the time when the SPA was executed because:

As I have already trailed, quite a number of issues arose under this heading as follows:

In the light of the conclusions set out in the sections which follow in relation to the other issues set out in paragraph 102 above, it is not strictly necessary for me to express a view on the first issue set out above. As I will go on to explain, I believe that Venerate and the Appellant were associated for the purposes of Section 201 at all relevant times and that their association did not cease by virtue of the acquisition of the Newcom shares by Clydpride on the execution of the SPA. Nevertheless, since this was a point of dispute between the parties, I will set out my view on it.

Mr Firth submitted that, as Venerate and the Appellant ceased to be associated by virtue of the execution of the SPA, the two companies were not associated at the precise moment in time at which the SPA was executed. This was because, at that time, Clydpride replaced Venerate as beneficial owner of the Newcom shares and Clydpride was not associated with Venerate.

Mr Firth relied on the FTT decision in HSP Financial Planning Ltd v The Commissioners for Her Majesty’s Revenue and Customs [2011] UKFTT 106 (TC) (“HSP”) as support for this proposition. In that case, a deduction claimed by the appellant for the amortisation of goodwill it had acquired was not available unless, at the time the goodwill was acquired, the disponors of the goodwill were not related to the appellant. The acquisition of the goodwill had occurred under a sale agreement under which the disponors had disposed of the goodwill to the appellant in return for shares and the acquisition of the shares by the disponors pursuant to that agreement was the event which made the disponors related parties to the appellant. The FTT held that, as the transfer of the goodwill and the issue of the shares had taken place simultaneously, the disponors were related parties at the time of the acquisition. It did not matter that they were not related parties before the acquisition.

Mr Firth said that, by parity of reasoning, since Venerate ceased to be the beneficial owner of the Newcom shares when the SPA was executed, it was not associated with the Appellant at that time if that was the time relevant for testing association for the purposes of Section 201.

In response, Miss Hughes said that the decision in HSP related to legislation which had the purpose of disallowing amortisation for goodwill owned prior to 1 April 2002 that was then transferred to a related party so that it remained within the same economic ownership after the transfer. In that context, a purposive construction of the relevant legislation required that disponors becoming related parties by virtue of transferring goodwill in exchange for shares should be treated as related parties at the time of the acquisition. A wholly different purpose informed the enactment of Section 193, which was designed to prevent donations linked to the acquisition of property by the charity from the donor or a person associated with the donor from qualifying for relief. Moreover, the use of the preposition “from” in Section 193(1) showed that, if the right time to test for association in the context of Section 193 was solely the time when Clydpride acquired the Newcom shares, then the test should be applied immediately before the SPA was executed and the acquisition occurred.

I do not find this an easy question to answer. However, I am inclined to agree with Miss Hughes that, after taking into account:

That having been said, for the reasons I am about to rehearse, I do not think that the above is of great relevance in the present context because, in my view, Venerate continued to be associated with the Appellant even after the SPA was executed and Clydpride acquired beneficial ownership of the Newcom shares.

In relation to the remaining issues set out in paragraph 102 above, the authorities make it clear that actual control of a company for the purposes of Section 450(2) lies with the company’s members and not with the company’s board – see Steele v EVC International NV [1996] STC 785 at 794-5, referring to earlier cases such as IRC v BW Noble Ltd 12 TC 911, British-American Tobacco Ltd v IRC 29 TC 49 and J Bibby & Sons Ltd v IRC 29 TC 167, where it was simply assumed that a company is controlled by its members. That is the case no matter how extensive the powers of the board may be in controlling the affairs of the company. It is customary for the members of a company to delegate to the board the power to manage the affairs of the company, whilst the members retain ultimate control of the company through their ability:

In this case, the members of Clydpride had the ability to remove the directors of the company although that was not by virtue of an express term to that effect in the articles. Instead, their power to remove the directors arose pursuant to the general power in Section 168 of the Companies Act 2006.

The members also had the right to amend the articles pursuant to Section 21 of the Companies Act 2006.

The members therefore had all of the rights which previous case law suggests are indicative of the members’ having actual control for the purposes of Section 450(2) with the possible exception of the right to appoint directors. I say “possible” exception because the relevant case law shows that the members of a company have an inherent power to appoint directors unless, on a proper construction of the articles, that inherent power has been excluded – see Worcester Corsetry Ltd v Witting [1936] Ch 640 and Clarke v Lakha [2024] EWHC 51 (Ch) – and I heard no argument from the parties as to whether or not the articles in this case should be construed as having excluded that right.

Leaving that aside for the moment, there were some features governing the relationship between the members and the directors in this case which merit further consideration. In particular, as mentioned in paragraph 24(2) above:

In the period leading up to the hearing, when the Appellant was still maintaining that the members of the company were persons unrelated to the Faust family, the Respondents sought to rely on the above features as showing that actual control of the company for the purposes of Section 450(2) was vested in the board and not the members whereas, for its part, the Appellant maintained that actual control of the company for the purposes of Section 450(2) was vested in the members based on the case law referred to in paragraph 110 above (or, because of the impact on the rights of the members of the constraints of the charities legislation and the members’ fiduciary obligation to exercise their rights and powers in relation to the company in furtherance of the charitable objects of the company, either that no-one had actual control of Clydpride or that actual control of Clydpride was vested in a combination of the members and the Charity Commissioners, taken together (as to which see further below)).

Of course, the respective arguments of the parties shifted somewhat after the revelation at the start of the hearing that LF and TF were in fact the only members of the company during the relevant period. That, of course, meant that members of the Faust family comprised a majority at both member and board level at all relevant times. Consequently, it became somewhat less pressing for the Respondents to succeed in persuading me that actual control of Clydpride was vested in Clydpride’s board. Instead, their focus shifted into persuading me that actual control of Clydpride was vested either in the board or in the members or in a combination of the board and the members, taken together. There was a corresponding shift in the position of the Appellant, which dispensed with the argument that actual control of Clydpride was vested in the members and sought instead to persuade me that the impact on the rights of the members of the constraints of the charities legislation and the members’ fiduciary obligation to exercise their rights and powers in relation to the company in furtherance of the charitable objects of the company meant that no-one had actual control of Clydpride or that actual control of Clydpride was vested in a combination of the members and the Charity Commissioners, taken together.

The above meant that the primary focus of the submissions at the hearing in relation to control of the company was less about the rights of the directors in relation to the company relative to the rights of the members in relation to the company than about the impact of the restrictions placed on the members referred to above on the members’ ability to have actual control of the company. Nevertheless, before I address the latter question, I do need to address the logically prior question of whether the rights of the directors in relation to the company relative to the rights of the members in relation to the company meant that it was the directors who had actual control of the company. In that regard, I do not think that the rights of the directors in relation to Clydpride were such as to confer on them actual control of the company for the purposes of Section 450(2).

After all, the members, and only the members, had the right to amend the articles. They also had the right to remove the directors and possibly also the right to appoint the directors, albeit that the board had similar rights of removal and appointment of directors.

As for the rights of the directors in relation to the appointment and removal of members, I do not think that the ability of the directors to remove a member who committed an unremedied default was of particular significance given that:

Turning to the directors’ unfettered right to refuse to approve the appointment of a new member, that did not give the directors a positive right to appoint new members. It merely enabled the directors to block the appointment, as a new member, of a person who applied to be a member. In addition, once appointed, the member in question was free to act without hindrance by the directors and could not be removed by the directors as long as he or she did not commit an unremedied breach.

Most critically of all, overlying the whole of this analysis, by virtue of their right to amend the articles, the members were in a position:

Taking all of the above into account, I have concluded that, based on the applicable case law, as between the members and the board, it was the members rather than the board who had actual control of the company for the purposes of Section 450(2).

I reach that conclusion despite the fact that the evidence shows that:

The fact remains that, whilst this may be an extreme example of circumstances where, in practice, a company is run by its board with little engagement by its members, the members had ultimate control over the company through their ability to remove the directors and to change the articles, albeit subject to the caveats referred to above and despite the fact that they did not exercise the relevant rights or even, apparently, realise that they had them.

However, as I have already indicated, that is not the end of the discussion because Mr Firth submitted that, in this case, the fact that the rights and powers of the members were subject to:

Starting with actual control for the purposes of Section 450(2), Mr Firth said as follows:

Mr Firth said that similar points to those set out in paragraphs 127(3) to 127(6) above arose in relation to deemed control for the purposes of Section 450(3). Section 450(3)(b) referred to “the greater part of the voting power” in the subject company but did not specify the issues to which that voting power needed to relate. For example, it was possible to conceive of circumstances in which the members of a company had variable levels of voting power on different issues. Mr Firth submitted that, in that instance, the key issues to which the voting power needed to relate in applying Section 450(3)(b) were the right to appoint and remove the directors of the company and the right to change the company’s articles. Thus, precisely the same limitations as those set out at paragraphs 127(3) to 127(6) above in relation to actual control for the purposes of Section 450(2) arose in relation to the voting power in a charitable company for the purposes of Section 450(3)(b).

My starting point in addressing this question is to note that it would be surprising, to say the least, if:

Leaving the second of those points aside for the moment, Mr Firth’s proposition that the members alone did not have control of Clydpride – whether actual or deemed – was founded on two distinct bases, as set out at paragraphs 127(4) and 127(5) above. It is worth observing at this point that, although both of those bases led, in Mr Firth’s submission, to the same conclusion – which is to say that the members of a charitable company alone do not have control of the charitable company for the purposes of Section 450 – they depend on slightly different reasoning.

The first basis – being subject to the constraints of the charities legislation (see paragraph 127(4) above) – depends for its efficacy on the proposition that the number of decisions which the members have the ability to make on an unencumbered basis by exercising their rights and powers are too limited to mean that the members have control of the company. In effect, they do not satisfy the test set out at paragraph 127(2)(a) above. The second basis is slightly different from that in that it depends for its efficacy on the proposition that, in exercising their rights and powers, the members are not free to act in their own self-interest and without regard to the interests of the company or anyone else but instead have a fiduciary obligation to act in furtherance of the charitable objects of the company. In effect, they do not satisfy the test set out at paragraph 127(2)(b) above. I will therefore deal with each of these points separately.

I do not agree with Mr Firth’s first basis.

Contrary to the assertion set out in paragraph 127(2)(a) above, the members of a company which is not a charity are not entirely free to exercise their rights and powers in relation to the company by making whatever decisions they wish to make in relation to the company. Every member of a company, no matter the sector in which the company operates, is required to comply with the laws and regulations to which that company is subject. For example, a member cannot exercise his or her rights and powers in a way which would lead the company to be in breach of the legislation applicable to companies in its jurisdiction of incorporation. In addition, there are limitations in common law which inevitably impinge on the decisions which the member is able to make.

Expanding the brief a little further, a number of companies operate in sectors other than the charity sector where they are required to comply with the laws and regulations applicable to that sector. For example, banks and other types of financial institutions are required to comply with the regulatory regime to which such entities are subject, public companies are required to comply with the rules of the exchange on which they are listed, and so on. Whilst the charity sector may be more highly regulated than most, the difference is one of degree and not of principle. What matters is not the extent to which the members are constrained by applicable law and regulation but the degree of control which the members are entitled to exercise within the parameters of the applicable law and regulation.

I therefore do not agree that the fact that the members of a charitable company are subject to the constraints of the charities legislation deprives the members of either actual control of the company for the purposes of Section 450(2) or the voting power in the company, and hence, deemed control for the purposes of Section 450(3).

I am equally unpersuaded by the second basis for Mr Firth’s submission.

My reason for saying that is that just because the members of a charitable company are required to exercise their rights and powers in relation to the company in a way that furthers the charitable objects of the company does not mean that they do not beneficially own those rights and powers. As Lady Arden made clear in CIFF SC at paragraph [50], the fiduciary duty owed by a member of a charitable company is owed not to the company itself but to the charitable objects of the company. Thus, the fiduciary obligation of the members of a charitable company in this regard is very different in nature from the fiduciary obligation owed by a person holding assets on trust for other persons. In the latter case, the trustee is not the beneficial owner of the asset (and hence the rights and powers attaching to the asset) in question. Instead, beneficial ownership belongs to the beneficiaries in accordance with the terms of the trust. In contrast, in the former case, despite his or her fiduciary obligation to act in furtherance of the charitable objects of the company, the member remains the beneficial owner of the rights and powers attaching to his or her membership interest.

The control legislation recognises this difference in nature between the two scenarios by:

In short, the existence of the fiduciary obligation to act in furtherance of the charitable objects of the company has no impact on the location of beneficial ownership of the rights and powers relating to the company. Beneficial ownership of those rights and powers remains with the member. The fiduciary obligation merely informs and qualifies the basis on which the member can exercise those rights and powers which he or she holds.

I would add that the fiduciary obligation owed by the members of a charitable company to exercise their voting rights in furtherance of the charitable objects of the company are not very different from the constraints on the members of every company to comply with the principles of law and equity in exercising their rights and powers, for example, the rule preventing the oppression of minorities – see Lady Arden in CIFF SC at paragraphs [88] and [89]. So it is not entirely accurate to say that the members of a company which is not a charitable company have no fiduciary obligation constraining their ability to exercise their rights and powers in their own self-interest.

It seems to me that Mr Firth’s analogy between trusts for persons and a fiduciary obligation as to purpose overlooks the distinction I have drawn above. He seeks to extrapolate from the provisions that exist in the control legislation in relation to trusts for persons a general principle to the effect that a person who has any kind of fiduciary obligation as regards an interest in a company should not be treated as holding the rights and powers attaching to that interest. I do not think that any such general principle exists. Indeed, Lady Arden in CIFF SC at paragraph [37] counselled against the assumption that a person owing fiduciary duties in relation to the charitable objects of a charity was in the same position as a trustee owing fiduciary duties to a beneficiary under a private trust.

A recent and pertinent example of this point, which relates to a charitable trust, is to be found in the decision of the CA in UBS v The Commissioners for Her Majesty’s Revenue and Customs [2014] STC 2278 (“UBS CA”). In UBS CA, at paragraphs [90] to [102], the CA addressed the question of whether UBS had exercised control over Mourant, a company acting as the trustee of the charitable trust which held the majority of the voting shares in the subject company (ESIP). At paragraph [99], the CA referred to the following dicta from the Upper Tribunal (the “UT”) decision in the case:

It seems to me to be implicit in that extract that the UT was accepting that, despite Mourant’s fiduciary obligation as the trustee of the charitable trust holding the shares in ESIP, control of ESIP was nevertheless vested in Mourant. That was why the UT had to address the question of whether the rights and powers of UBS in relation to Mourant served to deprive Mourant of that control. The CA went on to agree with the UT on this question. (Although the SC in UBS SC reversed the decision of the CA in UBS CA, it did not address the issue described above.) If Mr Firth’s position on this point were to be correct, both the UT and the CA would have missed a point of some significance in relation to the question of control in dealing with that issue.

Moreover, I do not see how the conclusion I have drawn in paragraphs 132 to 143 above is gainsaid by any of the authorities cited to me by Mr Firth in relation to the word “control” at the hearing. Those were:

In all three of the above cases, the restrictions on the ability to act of the person alleged to have control (the “putative controller”) went much further than the constraints placed on the members in the present case. For example:

In considering the potential relevance of each of the above cases, it is important to note that the mere existence of some limits on the exercise of freedom of choice does not automatically negate control. The SC in Wang at paragraph [41] said that, although control equated to having a real choice, the existence of some fetter over the exercise of a real choice was not inconsistent with having a real choice. The key thing to consider was the extent of the restrictions in question. In all three of the above cases, the restrictions placed on the putative controller’s or controllers’ exercise of control were considerably greater than the limits imposed on the exercise of control by the members in this case so that the facts in this case are readily distinguishable.

There is one other important point which I should make in relation to these three cases.

Of the three cases, neither Lithgows nor Keighley sheds any light on the meaning of the word “control” for the purposes of Section 450(2) for the simple reason that each of them related to a particular statutory definition of “control” – in Lithgows, Section 333(1) of the Income Tax Act 1952 and, in Keighley, Section 472 of the Corporation Tax Act 2009 – that, in each case, defined “control” as the power to secure that the affairs of the subject company were conducted in accordance with the putative controller’s wishes – which is to say language equivalent to that found in Section 1124.

Not only is that language different from the language in Section 450(2) but it refers expressly to the “wishes” of the putative controller, which is something that Section 450(2) does not. Indeed, in his analysis in Lithgows, Lord Guthrie placed particular emphasis on the word “wishes” when he considered the relevant definition in that case. As the word “wishes” does not appear in Section 450(2), Lithgows and Keighley are of no assistance in the present case.

Wang is potentially of greater relevance in relation to the meaning of the word “control” for the purposes of determining actual control under Section 450(2) because the legislation which was in issue in that case did not contain a definition of “control” so that the ordinary meaning of the word applied, as it does in Section 450(2). However, even so, the point at issue in Wang was control over money and not control over a company and it seems to me that the focus in Wang on the existence of a real choice may not be apposite in the latter case. This is because the ability to exercise the voting power in a company is sufficient to confer control over the company regardless of the extent to which the persons entitled to exercise the voting power have a real choice as to how they exercise that power. Putting this another way, it might well be the case that focusing on the existence of a real choice as to how voting power is exercised results in an inappropriate focus on the wishes of the persons holding the voting power as opposed to the simple fact that the persons in question hold that voting power and can exercise it.

It will be seen from the above that I do not consider that the constraints of the charities legislation or the fiduciary obligation to which the members of a charitable company are subject serve to deprive the members of a charitable company of control over the charitable company. Whilst those matters will inevitably affect how the members of a charitable company exercise their control over the company, they merely establish certain parameters within which the members exercise their control as opposed to depriving the members of that control altogether.

That very point was made by the CA in the context of deemed control through voting power in The Children’s Investment Fund Foundation (UK) v Attorney General [2017] EWHC 1379 (“CIFF CA”) at paragraphs [98] and [99], where the submission that the only member of a company did not possess the voting power in the company because of restrictions on the activities of the subject company which were similar to those I am addressing here was described as “convoluted” and duly rejected. Precisely the same reasoning informs the consideration of actual control in this context.

I am therefore of the view that, notwithstanding the constraints of the charities legislation and the fiduciary obligation of LF and TF, in their role as members, to act in furtherance of the charitable objects of the company:

Now that I have dealt with the issues relating to the control of Clydpride after the execution of the SPA, I will turn to address the question which is actually the one relevant to the potential application of Section 193 – namely, whether Venerate and the Appellant were associated for the purposes of Section 201 after the SPA was executed. It will be no surprise when I say that, given the conclusion I have reached in paragraph 153 above, my view is that the two companies were so associated and that there are a number of alternative routes to that conclusion. The paragraphs which follow set out just one or two of those alternative routes.

In relation to Venerate, it is common ground that:

It is common ground that, after Clydpride acquired the Newcom shares on the execution of the SPA, the person or persons together, if any, who had actual control of Clydpride at any time for the purposes of Section 450(2) also had actual control of the Appellant at that time for those purposes because he, she or they had indirect control of the Appellant, through Clydpride, for those purposes – see Kellogg Brown at paragraph [33]. Thus, in this case, LF and TF together had actual control of the Appellant for the purposes of Section 450(2).

In addition, TF alone had deemed control of the Appellant for the purposes of Section 450(3) because:

Given:

I say that because:

As I have already mentioned, there are a number of other routes to the same conclusion, which is not surprising given the extensive involvement of the Faust family in relation to each of Venerate, Clydpride and the Appellant and the broad terms of the applicable legislation, but it will be some relief to the reader to know that I do not propose to rehearse any of those other alternatives in this decision.

Given the above conclusion, it is, strictly speaking, unnecessary for me to address two other points made by Mr Firth in relation to control, which related to the allocation of rights and powers to other persons and were as follows:

Although I have not needed to address either of these submissions in reaching my conclusion that Venerate continued to be associated with the Appellant for the purposes of Section 201 even after Clydpride acquired the Newcom shares on the execution of the SPA, my views on them are as follows:

For the reasons set out above, I allow the appeal.

Although the Appellant has succeeded in its appeal, I feel compelled to make a few observations about the way in which the Appellant has conducted this dispute, which, in my view, has fallen short in a number of respects.

In particular, it was not acceptable for the Appellant to maintain throughout what has been a lengthy dispute with the Respondents that the members of Clydpride were two individuals who were not connected with the Faust family and then concede on the first morning of the hearing that those members were, in fact, LF and TF. It can be seen from the paragraphs above that the identity of the members of Clydpride was not merely a matter of incidental detail. It was of fundamental significance to the question of whether the Appellant and Venerate were associated after Clydpride acquired the Newcom shares on the execution of the SPA and therefore potentially highly relevant to the outcome of the appeal. Moreover, discovering the identity of the members of Clydpride should not have been an onerous or time-consuming task. By maintaining for so long that the members of Clydpride were not connected to the Faust family and then conceding the reality so late, the Appellant wasted a considerable amount of its own, and, more importantly, the Respondents’, time. This information should have come to light much earlier than it did.

It was also unacceptable for the Appellant’s representative, Brian White Limited:

Finally, I would like to express my appreciation for the detailed and helpful submissions which were made to me by Mr Firth and Miss Hughes before and at the hearing.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (the “Tribunal Rules”). The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

This Appendix describes the case management decision which I made at the start of the hearing in relation to the Respondents’ application to re-amend the SOC.

The background to the decision was as follows.

On 27 February 2023, the Appellant notified its appeals against the three assessments to the FTT. The grounds of appeal related solely to the 193 Issue and did not include an allegation that any of the assessments was invalid under the discovery provisions.

On 10 October 2023, the Respondents filed their original statement of case. This related solely to the appeal against the assessment in respect of the 2018 AP and dealt solely with the 193 Issue.

On 11 March 2024, the Respondents filed the SOC. This too related solely to the appeal against the assessment in respect of the 2018 AP and dealt solely with the 193 Issue.

In accordance with the directions for the hearing of this appeal of 26 September 2025, the Appellant was required to serve its skeleton argument by no later than 19 January 2026. The Appellant failed to comply with the direction or to apply for an extension of time. Upon enquiry by the Respondents, the Appellant’s representative informed the Respondents (and subsequently the FTT) that the skeleton would not be delivered until 17.00 on 26 January 2026, fourteen days prior to the hearing, which was “within the normal timescale”, due to the fact that “[we] have numerous tribunals on” but that the Appellant had no objection to giving the Respondents a similar seven day extension for serving their skeleton argument – from 26 January 2026 to 2 February 2026.

At 17.01 on 26 January 2026, the Appellant filed its skeleton argument. In that skeleton argument, the Appellant submitted that one of the reasons why its appeal should be upheld was that the Respondents had failed to plead the validity of the assessments in the SOC, as they were required to do pursuant to the UT decision in Burgess v The Commissioners for Her Majesty’s Revenue and Customs [2015] UKUT 578 (TCC) at paragraphs [43], [44] and [63] to [68].

At 13.55 on 29 January 2026, the Respondents made an application to re-amend the SOC and to admit a witness statement from Officer Macdonald setting out the basis on which he had made the assessments. Almost all of the amendments to the SOC related to the Discovery Issue although there were also some other corrections.

On 2 February 2026, in response to that application, Judge Anne Fairpo of the FTT granted the application subject to any objection in writing from the Appellant within seven days and specified that, in the event of any such objection, the application would be addressed by me at the start of the hearing.

At 16.23 on 2 February 2026, the Respondents filed their skeleton argument.

On 9 February 2026, the Appellant wrote to the Respondents and the FTT objecting to the application. The primary focus of the Appellant’s objection was the introduction into the SOC at such a late stage in the proceedings of references to the Discovery Issue.

On considering the application by the Respondents and the Appellant’s objection, I started by noting the points which were common ground. These were as follows:

Turning then to the various factors to be taken into account in relation to the application, I considered that the following factors pointed in favour of denying the application:

On the other hand, I considered that the following factors pointed in favour of allowing the application:

I also considered whether the strength or weakness of each party’s case was a factor to be taken into account in addressing the application. I considered that it was ultimately a neutral factor given that:

Taking all of the above into account, the point set out in paragraph 14(5) above seemed to me to be at the heart of the debate. In that regard, there was a significant dispute between the parties as to whether allowing the application would substantially handicap the Appellant in dealing with the Discovery Issue at the hearing – assuming that we proceeded to deal with the issue at the hearing – or require the hearing to be postponed or the case to go part-heard. This turned on whether:

In relation to the sufficiency of the evidence, the Respondents, who bore the burden of proof in relation to the Discovery Issue, said that the relevant evidence would be sufficient whereas the Appellant said that it would not.

The Appellant had raised a number of issues of fact and law which it said it could not adequately deal with should the application be allowed and the Discovery Issue be dealt with at the hearing.

The questions of law were, in my view, of no moment. Leaving aside the point which I make in paragraphs 25 to 27 below, the Appellant had had almost two weeks to consider the points of law and would have had almost three weeks to do so but for its own default in following the directions.

Therefore, the only question was whether the Appellant would be precluded from dealing properly with the issues of fact relevant to the Discovery Issue, if it had access only to the evidence in the bundle, the new witness statement and its ability to cross-examine Officer Macdonald.

On balance, my view was that the Appellant would not be so precluded.

For example, on the factual issue of whether the alleged error in the Appellant’s return was brought about carelessly, it was common ground that the Appellant did not take advice on the potential application of Section 193 to these facts. The Respondents said that it was careless to fail to take advice and that, had advice been taken, the deduction would not have been claimed in the return. The Appellant said that it was not careless to fail to take advice and that, had advice been taken, the Appellant would still have claimed the deduction in the return. This was ultimately a matter for submissions. It was not clear to me what additional facts the Appellant would anticipate introducing given the nature of that dispute.

In relation to the sufficiency of the length of the hearing, the three days allowed for the hearing were, in my view, sufficient for the Discovery Issue to be fully addressed.

I therefore considered that the Appellant would be able to deal with the Discovery Issue at the hearing and that there would be no need to postpone the hearing or adjourn the case part-heard to deal with the Discovery Issue at a later date.

Each party in its submissions had sought to make much of the fact that the other party knew that there was a disagreement between them in relation to the Discovery Issue but did not include anything on the issue in its or their pleading. However, in my view, each party had known all along that the other party did not accept its position in relation to discovery. So far as the present application was concerned, the Appellant could hardly have thought that the Respondents had abandoned their position as to the validity of the assessments given that:

It is common ground that the onus was on the Respondents to include the Discovery Issue in the SOC rather than on the Appellant to include the Discovery Issue in the grounds of appeal. Accordingly, I took that into account in the factors set out in paragraphs 13 to 15 above. However, in my view, the omission of the Discovery Issue in the SOC was simply a mistake by the Respondents. The Appellant in its objection submissions had sought to impute to the Respondents the motive of hoping that, by failing to address the Discovery Issue in the SOC, it would be too late for the Appellant to raise the issue at the hearing. I did not agree with that. Apart from anything else, the Respondents could not have been sure that the hearing judge would refuse the Appellant’s application to amend its grounds of appeal to include the Discovery Issue.

In addition, the Respondents had taken steps to remedy their mistake as soon as it had been pointed out to them and had done so in circumstances where the Appellant had known all along that the Respondents did not agree with its views in relation to the Discovery Issue.

In conclusion, I accepted that this was a case where the position was finely balanced. However, taking all of the above into account, my decision was that, in accordance with the overriding objective of dealing with this appeal fairly and justly, for the reasons set out above:

In Chapter 1 of Part 6 of the CTA 2010:

Section 191, which is within Chapter 2 of Part 6 of the CTA 2010, then sets out six conditions which a donation needs to satisfy if it is to be a qualifying payment. It is common ground that the donations to which this appeal relates satisfied five of the six conditions. The only condition over which there is a dispute is Condition D in Section 191(5), which provides as follows:

Condition D is that the payment is not disqualified under section 193 (associated acquisition etc by the charity).”

Section 193 provides as follows:

A payment is disqualified under this section if—

it is conditional on an acquisition of property by the charity from the company or a person associated with the company,

it is associated with such an acquisition, or

it is part of an arrangement involving such an acquisition.

An acquisition by way of gift is to be ignored for the purposes of this section.”

It can be seen that the section requires, inter alia, the persons who are “associated” with the paying company to be identified.

To that end, Section 201 provides as follows:

the company, or

a person connected with the company”.

Since Section 201 defines a person who is “associated” with the company by reference to connection, and there is no definition of connection within Part 6 of the CTA 2010 itself, the general definition set out in Sections 1122 and 1123 applies. These sections, in turn, depend on the definition of “control” in Sections 450 and 451 and related definitional provisions.

Sections 1122 and 1123 provide as follows:

This section has effect for the purposes of the provisions of the Corporation Tax Acts which apply this section (or to which this section is applied).

A company is connected with another company if—

the same person has control of both companies,

a person (“A”) has control of one company and persons connected with A have control of the other company,

A has control of one company and A together with persons connected with A have control of the other company, or

a group of two or more persons has control of both companies and the groups either consist of the same persons or could be so regarded if (in one or more cases) a member of either group were replaced by a person with whom the member is connected.

A company is connected with another person (“A”) if—

A has control of the company, or

A together with persons connected with A have control of the company.

In relation to a company, any two or more persons acting together to secure or exercise control of the company are connected with—

one another, and

any person acting on the directions of any of them to secure or exercise control of the company.

An individual (“A”) is connected with another individual (“B”) if—

A is B's spouse or civil partner,

A is a relative of B,

A is the spouse or civil partner of a relative of B,

A is a relative of B's spouse or civil partner, or

A is the spouse or civil partner of a relative of B's spouse or civil partner.

A person, in the capacity as trustee of a settlement, is connected with—

any individual who is a settlor in relation to the settlement,

any person connected with such an individual,

any close company whose participators include the trustees of the settlement,

any non-UK resident company which, if it were UK resident, would be a close company whose participators include the trustees of the settlement,

any body corporate controlled (within the meaning of section 1124) by a company within paragraph (c) or (d),

if the settlement is the principal settlement in relation to one or more sub-fund settlements, a person in the capacity as trustee of such a sub-fund settlement, and

if the settlement is a sub-fund settlement in relation to a principal settlement, a person in the capacity as trustee of any other sub-fund settlements in relation to the principal settlement.

A person who is a partner in a partnership is connected with—

any partner in the partnership,

the spouse or civil partner of any individual who is a partner in the partnership, and

a relative of any individual who is a partner in the partnership.

But subsection (7) does not apply in relation to acquisitions or disposals of assets of the partnership pursuant to genuine commercial arrangements.

In section 1122 and this section—

For the purposes of section 1122—

a unit trust scheme is treated as if it were a company, and

the rights of the unit holders are treated as if they were shares in the company.

For the purposes of section 1122 “trustee”, in the case of a settlement in relation to which there would be no trustees apart from this subsection, means any person—

in whom the property comprised in the settlement is for the time being vested, or

in whom the management of that property is for the time being vested.

If any provision of section 1122 provides that a person (“A”) is connected with another person (“B”), it also follows that B is connected with A.”

It may be seen from those provisions that the definition of “control” in Sections 450 and 451 is of central importance to determining connection. Those sections provide as follows:

This section applies for the purpose of this Part.

A person (“P”) is treated as having control of a company (“C”) if P—

exercises,

is able to exercise, or

is entitled to acquire,

In particular, P is treated as having control of C if P possesses or is entitled to acquire—

the greater part of the share capital or issued share capital of C,

the greater part of the voting power in C,

so much of the issued share capital of C as would, on the assumption that the whole of the income of C were distributed among the participators, entitle P to receive the greater part of the amount so distributed, or

such rights as would entitle P, in the event of the winding up of C or in any other circumstances, to receive the greater part of the assets of C which would then be available for distribution among the participators.

Any rights that P or any other person has as a loan creditor are to be disregarded for the purposes of the assumption in subsection (3)(c).

If two or more persons together satisfy any of the conditions in subsections (2) and (3), they are treated as having control of C.

See also section 451 (section 450: rights to be attributed etc).

This section applies for the purposes of section 450.

A person is treated as entitled to acquire anything which the person—

is entitled to acquire at a future date, or

will at a future date be entitled to acquire.

If a person—

possesses any rights or powers on behalf of another person (A), or

may be required to exercise any rights or powers on A's direction or behalf,

There may also be attributed to a person all the rights and powers—

of any company of which the person has, or the person and associates of the person have, control,

of any two or more companies within paragraph (a),

of any associate of the person, or

of any two or more associates of the person.

The rights and powers which may be attributed under subsection (4)—

include those attributed to a company or associate under subsection (3), but

do not include those attributed to an associate under subsection (4).

Such attributions are to be made under subsection (4) as will result in a company being treated as under the control of 5 or fewer participators if it can be so treated.”

The above provisions refer at various places to an “associate” of a person. For this purpose, an “associate” is defined in Section 448 as follows:

In this Part “associate”, in relation to a person (“P”), means—

any relative or partner of P,

the trustees of any settlement in relation to which P is a settlor,

the trustees of any settlement in relation to which any relative of P (living or dead) is or was a settlor,

if P has an interest in any shares or obligations of a company which are subject to any trust, the trustees of any settlement concerned,

if P—

is a company, and

has an interest in any shares or obligations of a company which are subject to any trust,

if P has an interest in any shares or obligations of a company which are part of the estate of a deceased person, the personal representatives of the deceased, or

if P—

is a company, and

has an interest in any shares or obligations of a company which are part of the estate of a deceased person,

In this section, “relative” means—

a spouse or civil partner,

a parent or remoter forebear,

a child or remoter issue, or

a brother or sister.”