IRD v HMRC

Entitlement to working tax credit requires satisfaction of every applicable condition in the Tax Credits Act 2002 and the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002. An activity may be carried on commercially without being profitable, but the requirement that it be carried on with a view to the realisation of profits requires more than an intention or hope of profit. There must be a realistic expectation of profit within the foreseeable future and a credible plan for achieving it. A person trading financial futures solely as principal does not satisfy the requirement that work be done for payment or in expectation of payment where the payments received represent market value rather than remuneration for the work undertaken. An error by the First-tier Tribunal is immaterial where the appeal was bound to fail because another entitlement condition was not satisfied.

The appellant claimed working tax credit for the 2021–2022 and 2022–2023 tax years, relying on his work trading financial futures for his own account. HMRC decided that he was not engaged in qualifying remunerative work. The First-tier Tribunal dismissed both appeals.

The appellant appealed, alleging errors in the interpretation of self-employment and qualifying remunerative work, bias, and unfair case management. The central issues were whether his futures trading was self-employment carried on on a commercial basis and with a view to the realisation of profits, and whether the work was done for payment or in expectation of payment.

1. Appeals dismissed. The First-tier Tribunal’s decision did not involve a material error of law.
2. Under regulation 2(1) of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, the assessment of self-employment requires separate consideration of whether the claimant is carrying on a trade, profession or vocation, whether it is carried on on a commercial basis, whether it is carried on with a view to the realisation of profits, and whether it is organised and regular. A composite assessment risks obscuring the decision-making process.
3. The factors identified in JW v HMRC [2019] UKUT 114 (AAC) are illustrative rather than prescriptive. Profitability must not be used as a proxy for commerciality. The relevant factors depend on the circumstances of the particular enterprise.
4. The phrase “with a view to the realisation of profits” does not require past profitability or certainty about future profits. It requires more than an intention or hope of profit: there must be a realistic expectation of profit in the foreseeable future and a credible plan for achieving it. The appellant’s prolonged losses and lack of such a plan entitled the First-tier Tribunal to find that this condition was not met.
5. The fourth condition in regulation 4 of the Regulations was also unsatisfied. The appellant traded solely for his own account. Payments received on selling futures contracts were the market value of those contracts, not payment for the research, analysis, trading and administration undertaken. The work therefore was not done for payment or in expectation of payment.
6. The First-tier Tribunal’s failure to make an express finding on whether the activity was organised and regular could not affect the result, because failure to satisfy any one condition was sufficient to defeat the claims. The allegations of actual and apparent bias were unsupported; the applicable test was stated in Porter v Magill [2002] 2 AC 357. The refusal of a continuation hearing was within the Tribunal’s case-management powers. The Tribunal was required to address only evidence and arguments material to its decision, applying the principle described in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 at [114].

• Upper Tribunal (Administrative Appeals Chamber): appeals dismissed on 13 February 2025. The First-tier Tribunal decision was upheld because it did not involve a material error of law.
• First-tier Tribunal (Social Entitlement Chamber): both appeals dismissed on 31 January 2024. The decisions were that the appellant was not entitled to working tax credit for the relevant tax years.
• HMRC: decisions dated 15 December 2022 refused working tax credit because the appellant was not in qualifying remunerative work.