Marcus Jays & Anor v The Commissioners for HMRC
Decision date: 22 September 2022
Neutral citation: [2022] UKFTT 420 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This appeal concerned whether dividends declared by Questor Properties Ltd for years ending 2014–2016 which were credited to directors' "blocked" accounts under an undertaking to Lloyds gave rise to an enforceable right to payment and thus a charge to income tax. The First-tier Tribunal held those credited but deferred amounts did not create an enforceable debt on declaration and therefore were not taxable distributions; the discovery assessments and related penalties were set aside and the appeals allowed. The Tribunal added that, had the amounts been taxable, HMRC could have validly issued discovery assessments but failed to prove the necessary culpability for penalties.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
A dividend declared but subject to a legally effective stipulation deferring payment (for example described as "held in abeyance" or "not available until further notice") does not create an enforceable right to payment at the date of declaration and therefore is not a distribution chargeable to income tax at that date; accounting treatment or entries alone do not convert such deferred amounts into taxable distributions.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal commented that HMRC's analogy to a guarantor's deposit was inapposite and emphasised that accounting treatment does not determine legal enforceability. It also noted more generally that omission or sparse disclosure on returns (e.g. using "white space") will not automatically prevent HMRC from raising discovery assessments, because the adequacy threshold for disclosure is high.