Rogge & ors v HMRCC [2012] UKFTT 49 (TC)

Analysis

There were three joined appeals, namely that of R who had paid interest under a loan to the trustees of a trust of which he was the settlor and those of K and the trustees of a trust in which K, the settlor, was interested. K had paid rent to the trustees of a trust under which he was a settlor and of which he was the life tenant. All appealed income tax assessments on the basis that it is impossible for a taxpayer to be taxed on his own expense. Parliament could not have intended s660A(1) of the Income and Corporation Taxes Act 1988 to have this effect. Section 660A(1) provided that the income arising under a settlement during the life of the settlor is treated as his income, unless the settlor is not interested in the trust.

Held – dismissing the appeals

1. (1) It is possible for a settlor to be subject to income tax on payments that he has made, Commissioners of Inland Revenue v Leiner (1964) and Ang v Parrish (Inspector of Taxes) [1980] and, although it was absurd, s660A(1) read literally requires the settlor to pay income tax in respect of income he has himself paid to the trustees and is not capable of any other interpretation that avoids the absurdity, Harding v HMRC [2008] followed.
2. (2) R was liable to the income tax charged on him. K was also liable to the income tax charged on him which was the gross rent paid to the trustees without taking account of the management expenses paid by the trustees.

JUDGMENT JOHN BROOKS, JO NEILL: [1] We heard the appeals of Mr Olaf Rogge (TC/2009/15217), Mr John Martin Kent (TC/2009/15221) and the JM Kent settlement (TC/2009/15219) together, under reference TC/2009/15217, in accordance with the direction of the tribunal released on 19 February 2010. [2] All three Appellants were represented by Mr Terence Morris of Lansburys …

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