Constantinos Kyriaides v The Commissioners for HMRC

This is the application of the Appellant dated 29 April 2025 that these proceedings are stayed pending

The application is opposed by the Respondents (‘HMRC’).

The hearing lasted 1 day. The documents to which I was referred were contained within the 381-page document bundle, 98-page supplementary bundle and skeleton arguments from both parties.

The substantive issues in this appeal concern transactions relating to a ‘Self-Employed Remuneration Trust’ where deductions were claimed in relation to trust costs and contributions into GC Wealth RT Ltd in the tax years 2017/18 to 2021/22.

The Appellant included in their tax returns deductions which were described as relating to contributions made to a “creditor protection trust” and asserted that the contributions were "allowable property expenses”. Some of these contributions related to rental income.

The Appellant’s appeal is against HMRC decisions resulting in additional tax of £76,733 and penalties in the amount of £37,599 for the same periods.

The Tribunal may give a direction in relation to the conduct or disposal of proceedings at any time, including a direction to stay proceedings, by virtue of rule 5 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (‘FTT Rules’).

Rule 2 of the FTT Rules sets out the overriding objective which provides that I must deal with cases fairly and justly, including dealing with cases in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and resources of the parties. I must also ensure, so far as practicable, that the parties are able to participate fully in the proceedings and avoid delay so far as compatible with a proper consideration of the issues.

In determining the Appellant’s application that these proceedings are stayed pending the outcome of the FIR, I have considered the documentation before me which sets out that the government has scheduled to consider this review once concluded and publish a response by the Autumn Budget which will be delivered on 26 November 2025.

The FIR is confined to the scope of the Loan Charge legislation, specifically addressing disguised remuneration schemes used between 9 December 2010 and 5 April 2019. It will cover both the Loan Charge itself and any related outstanding tax liabilities arising from the income involved, and aims to resolve outstanding issues related to the Loan Charge by focusing on bringing closure to those affected, ensuring fairness across the taxpayer population, and making sure appropriate support is available for individuals subject to the charge. The review will explore why some individuals have not yet settled their tax liabilities with HMRC, seeking to identify the obstacles they face and propose practical ways to help them reach resolution, and considering how best to encourage unresolved cases to settle.

HMRC’s policy paper dated 4 June 2025 states:

“HMRC won't be able to tell customers exactly how they may be affected until both:

the review is complete, and the findings are published

the government issues its response to any review recommendations

HMRC will then write to customers again to update them on next steps.”

I have considered that the burden in making out the grounds for a stay is upon the Appellant and there is an inherent interest in the case proceeding (see GAP Group Limited v HMRC [2022] UKFTT 397 (TC) at [52]).

HMRC submits that the FIR is limited in scope to disguised remuneration schemes within the Loan Charge legislation, specifically between 9 December 2010 and 5 April 2019 and that HMRC does not intend to rely on the loan charge provisions in this appeal, which concerns property income and deductions. They argue that the Appellant has not demonstrated how the FIR would materially affect the legal issues in this case or that the FIR is relevant to the proceedings, and speculative settlement possibilities do not justify a stay, as any delay would be contrary to the Tribunal’s overriding objective, which includes avoiding unnecessary delay and ensuring efficient use of Tribunal resources.

The Appellant argues that the FIR may present new settlement opportunities, and that proceeding with litigation now would risk unnecessary costs, undermining the Tribunal’s overriding objective, which includes dealing with the case in ways which are proportionate to the anticipated costs and the resources of the parties. They refer to evidence from a freedom of information request published by the All-Party Parliamentary Loan Charge & Taxpayer Fairness Group, which suggests HMRC offered highly favourable settlement terms to corporate bodies while adopting a harsh and punitive approach toward contractors and argue that HMRC has misunderstood the relevance of the FIR, which is not about altering the legal analysis for the substantive appeal but about potentially eliminating the need for a hearing altogether by creating new settlement opportunities. The Appellant contends that pressing ahead with litigation before the FIR concludes undermines its purpose, as the review is expected to recommend settlement terms for self-employed taxpayers that align with those offered to other entities, focusing on the scheme user rather than the taxpayer’s classification.

The Appellant also refers to the Tribunal’s Practice Statement on Alternative Dispute Resolution which encourages parties to consider settlement opportunities, and argues that the FIR directly aligns with that objective. They submit that the proposed delay is short and proportionate, would not prejudice HMRC’s ability to present evidence, and may avoid unnecessary litigation altogether.

Having considered the detailed submissions made by both parties, I agree with HMRC that the inherent uncertainty arising from the review does not assist the Appellant where the burden is upon them to make out the need for a stay. However, I must also consider the potential for settlement opportunities where HMRC’s stated position is that they are unable to say whether the Appellant will be affected by the FIR until both the review’s findings are published and the government issues its response to any review recommendations.

The Tribunal must respect the need for litigation to be conducted proportionately and should consider the overriding objective and strike a balance of fairness between both parties. On balance, I consider the potential prejudice to HMRC from what is now a relatively short delay to be outweighed by the potential prejudice to the Appellant should the application be refused. I am satisfied that the FIR may materially affect the resolution of this appeal. Given the relatively short timeframe until the government’s response is expected, the Tribunal’s duty to facilitate ADR where appropriate, and the potential for reducing costs, I consider it proportionate and just to grant a stay in these circumstances.

Shortly before the release of this decision, the Supreme Court refused permission to appeal the Court of Appeal decision in Marlborough, rendering the application to stay this appeal behind that case futile. However, further to the request made by the parties during the hearing, and for the purposes of completeness, the reasons for refusing that application are set out below.

In determining whether this appeal should be stayed behind Marlborough, I adopt the approach taken in Revenue and Customs Commissioners v RBS Deutschland Holdings GmbH [2007] STC 814, namely, to consider: (i) whether the decision in the other appeal will be of “material assistance” and (ii) whether, it is expedient to stay the appeal.

The Appellant argues that the Supreme Court’s forthcoming decision in Marlborough could provide significant guidance relevant to this appeal and submits that the case will address issues concerning the deductibility of contributions to remuneration trusts, which is a central question in these proceedings. In particular, the Appellant contends that the Supreme Court may clarify the interpretation and application of the “wholly and exclusively” test under UK tax law, a principle that underpins HMRC’s disallowance of the claimed deductions.

The Appellant also submits that even if the Marlborough decision does not resolve all issues in this case, it could materially assist the Tribunal by shaping the legal framework for assessing deductibility and influencing how findings of fact and law should be approached. They argue that the outcome could affect pleadings, the scope of evidence required, and the legal analysis to be applied at the hearing. The Appellant also argues that the Tribunal has discretion to grant a stay where another decision may be of material assistance, and that a stay need not be limited to cases where the other decision would be determinative.

The Appellant further submits that granting a stay would promote consistency and efficiency, avoiding the risk of proceeding under an uncertain legal position only to have the Supreme Court issue guidance shortly thereafter. They argue that the interests of justice favours a short delay to ensure the Tribunal benefits from any authoritative clarification on deductibility principles.

Having carefully considered the Appellant’s submissions, I am not satisfied that the decision in Marlborough will be of material assistance in this appeal or that it is expedient to stay this appeal pending the outcome of the Supreme Court judgment.

I agree with HMRC that the issues in Marlborough are fundamentally different from those in the present appeal. Aside from the statutory differences involved in a case concerning employment income provisions in Marlborough and property income provisions in this appeal, the “wholly and exclusively” issue in Marlborough focuses on whether the Upper Tribunal was entitled to interfere with the First-Tier Tribunal’s finding that a payment made for tax avoidance purposes was made wholly and exclusively for the purposes of trade.

I accept that there are some similarities in the factual and legal issues involved in the cases. However, I do not consider this demonstrates that the other appeal will be of material assistance. The question is not whether the determination of another court might provide assistance, but whether it will provide material assistance (see Coast Telecom Limited v HMRC [2012] UKFTT 3017 (TC) at [21]).

I consider the issue of whether the Upper Tribunal was entitled to interfere with the First-Tier Tribunal’s finding is not relevant to the first-instance hearing of this appeal, where the First-Tier Tribunal is yet to make any findings of fact. Accordingly, I do not consider that it would be expedient to delay the first-instance hearing in this appeal pending the determination of that issue.

I consider it to be appropriate and in the interests of fairness and justice for this appeal to be stayed pending the outcome of the FIR. The Appellant’s application for this stay is therefore granted.

I do not consider it to be appropriate and in the interests of fairness and justice for this appeal to be stayed pending the final determination of the appeal proceedings in Marlborough. The Appellant’s application for this stay is therefore refused.

I consider it to be appropriate to make the following directions.

IT IS DIRECTED THAT:

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.