Thomas William Good v The Commissioners of HM Revenue And Customs

For Income Tax (Trading and Other Income) Act 2005 section 611, receiving income and being entitled to income are distinct concepts. The provision may apply where income is paid to a third party under security arrangements, if the taxpayer retains a real interest or benefit, including discharge of personal loan obligations. An assignment is not automatically decisive. Entitlement requires a realistic appraisal of the transaction giving rise to the income and its commercial context. Section 611 does not require the whole scheme to be treated as one composite transaction. Fixed minimum payments payable as consideration for film rights remained income from a non-trade film-exploitation business under section 609, notwithstanding their payment to the lender.

The taxpayer participated in a film-rights scheme involving loans, film acquisitions and distribution agreements. The agreements provided for Minimum Annual Payments (MAPs), which were directed to the lender under security arrangements and applied against the taxpayer’s loan obligations.

HMRC issued discovery assessments for income tax on the MAPs. The First-tier Tribunal dismissed the taxpayer’s appeal, and the Upper Tribunal dismissed his appeal at [2021] UKUT 281 (TCC). The taxpayer appealed on the remaining questions whether he was entitled to the MAPs under section 611 of the Income Tax (Trading and Other Income) Act 2005, and whether the MAPs were income from a film-exploitation business under section 609.

1. Appeal dismissed unanimously. Lady Justice Whipple gave the leading judgment. Lord Justice Snowden concurred, and Lady Justice King agreed. The taxpayer remained liable to income tax on the MAPs.
2. The Ramsay approach required the statutory words to be construed purposively and applied to the transaction viewed realistically. Section 611 uses ordinary, non-technical language. Receipt and entitlement are distinct, and more than one person may potentially fall within the provision. The section does not import the domestic law concepts of beneficial ownership or beneficial entitlement.
3. The focus was on the transaction giving rise to the income, rather than the scheme viewed as an indivisible composite transaction. The existence of an assignment or charge was not necessarily determinative. The taxpayer retained a contractual right under the Distribution Agreement, and the MAPs produced a real benefit because their payment discharged his obligations under the Loan Agreement. The reversionary arrangements also showed that he had not completely divested himself of the rights.
4. The court applied the principle illustrated by CIR v Paterson (1924) 9 TC 163, Dunmore v McGowan [1978] STC 217 and Peracha v Miley [1990] STC 512: a taxpayer may remain accountable for tax on income paid to a third party where the taxpayer benefits from that payment.
5. Lord Justice Snowden additionally held that the purported assignment was conditional because it operated only until repayment of the secured obligations. It was therefore not an absolute statutory assignment under section 136 of the Law of Property Act 1925, although it operated as an equitable assignment by way of security. The charge did not transfer ownership.
6. The MAPs were part of the consideration for the sale of the film rights and were therefore income from the film-exploitation business under section 609 of the Income Tax (Trading and Other Income) Act 2005. Their fixed calculation and payment to the lender did not alter their source.

1. Court of Appeal (Civil Division) — In [2023] EWCA Civ 114, the appeal was dismissed.
2. Upper Tribunal (Tax and Chancery Chamber) — In [2021] UKUT 281 (TCC), the taxpayer’s appeal from the First-tier Tribunal was dismissed.
3. First-tier Tribunal (Tax Chamber) — In [2020] UKFTT 0025 (TC), the taxpayer’s appeal against the discovery assessments was dismissed.