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Miss M Hepburn v HMRC

In Miss M Hepburn v HMRC (TC02837 – 29 August) a woman (H) agreed to provide consultancy services to a client through a newly-formed company (T). Much of the work was performed before T was incorporated. However the fee was subsequently paid into T’s bank account. T included the fee in its accounts and paid the corporation tax. Subsequently HMRC formed the opinion that the income was taxable on H rather than on T under ITTOIA 2005 s 8 and issued a protective discovery assessment. H appealed. The First-tier Tribunal allowed her appeal. Judge Reid held that ‘the substance and commercial effect of the arrangements’ was that H was never entitled to the income and was not taxable on it.

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Why it matters: Judge Reid rejected HMRC’s contention that the relevant income should be taxed on the director rather than...

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