Equity Advisory Limited & Anor v The Commissioners for HMRC

An appellate tribunal must read an alleged error of law in the context of the decision as a whole and the findings supporting it. A tribunal’s observation that an alternative mechanism for reward would be expected does not necessarily create a separate legal test or an additional ground for its conclusion. Where the tribunal has already found, as a matter of substance, that a payment was remuneration for services, such an observation may simply reinforce that factual conclusion. Permission to appeal requires an arguable error of law; disagreement with the tribunal’s contextual reading of its own reasoning is insufficient.

Equity Advisory Limited and Craig Allan Mellor applied for permission to appeal against the First-tier Tribunal’s decision dismissing their appeals concerning the tax treatment of a payment made by Equity Advisory Limited to Mr Mellor. The First-tier Tribunal had found that the payment was employment income, and made alternative findings concerning its treatment as a distribution or miscellaneous income.

The Upper Tribunal had granted permission on most grounds but refused permission on Ground 1(c). The applicants renewed that application orally, arguing that paragraph 94 of the First-tier Tribunal’s decision imposed an erroneous, free-standing requirement to identify another instrument or mechanism by which Mr Mellor could claim reward for his services. The issue was whether that passage disclosed an arguable error of law.

1. Application refused. Permission to appeal on Ground 1(c) was refused because the ground disclosed no arguable error of law.
2. Paragraph 94 of the First-tier Tribunal’s decision had to be read in the context of the decision as a whole and the tribunal’s findings of fact. The First-tier Tribunal had concluded that, viewed in the round, the source of the payment was Mr Mellor’s employment with Equity Advisory Limited and that the payment was remuneration or a reward for his services as a director.
3. In that context, the reference to an alternative instrument or mechanism did not establish a general legal principle or a free-standing requirement that a document or instrument providing for reward must be identified. It was an observation reinforcing the tribunal’s factual conclusion that Mr Mellor expected to be rewarded for his services and that the payment was made for those services.
4. The Upper Tribunal therefore rejected the characterisation of paragraph 94 as an additional or independent reason for the First-tier Tribunal’s conclusion. The First-tier Tribunal’s reasoning, properly understood, did not disclose the alleged error of law.

• First-tier Tribunal (Tax Chamber): Appeals by the applicants were dismissed in the decision released on 24 October 2024, reported as [2024] UKFTT 953 (TC). Permission to appeal was refused.
• Upper Tribunal (Tax and Chancery Chamber): Permission was granted on other grounds but refused on Ground 1(c). The renewed application on that ground was refused.