The Court of Appeal dismissed HMRC’s appeal in Currell [2026] EWCA Civ 445 confirming that a genuine, repayable EBT loan did not give rise to taxable earnings. The judgment rejects attempts to extend s.62 beyond its proper limits and cautions against retrospective overreach, despite the later introduction of Part 7A.

The Court of Appeal decision in The Commissioners for HMRC v MR Currell Limited [2026] EWCA Civ 445 confirms the Upper Tribunal’s conclusion that neither an £800,000 contribution to an employee benefit trust nor a related loan to a director constituted taxable earnings under section 62 ITEPA.

HMRC’s appeal was dismissed, with the Court holding that the Upper Tribunal had not erred in law and had reached the correct conclusion on the facts.

At the centre of the case was a “prewired” arrangement in which a contribution to an EBT was immediately on-lent to a director. While the loan was made because of the director’s work, the Court drew a clear distinction between that factual link and the legal character of the payment.

Genuine loan and repayment obligation central

As with the Upper Tribunal, the decisive feature was that the loan was genuine and subject to a real obligation to repay. The Court emphasised that what the director obtained was access to funds, but subject to that repayment obligation.

That point was fundamental. The existence of the repayment obligation meant that neither the loan nor the underlying payment could be characterised as earnings in the amount of the principal.

The Court confirmed that, as a general proposition, a loan is not the payment of earnings because the benefit lies only in the use of the funds, not in the principal itself.

This reflects the established statutory framework, under which employment-related loans are taxed through specific provisions rather than as general earnings.

Payment to the trust not earnings

HMRC’s primary argument—that the contribution to the EBT constituted earnings because it funded a reward for services—was rejected.

The Court described this as a non sequitur. The fact that a loan is provided because of work done does not mean that a payment made to fund that loan is itself remuneration.

The analysis must focus on the nature of what is received. That is the core principle underpinning section 62. Tax is charged on remuneration, not on all transactions connected with employment.

The Court repeatedly returned to this point: the fact that the arrangements were “prewired” and connected with employment did not determine the character of the payment.

Distinguishing Rangers

The Court also rejected HMRC’s reliance on Rangers.

It confirmed that Rangers is primarily concerned with the question of whether remuneration remains taxable when paid to a third party. In that case, it was common ground that the payments were remuneration.

By contrast, in Currell, the central issue was whether the payment to the EBT was remuneration at all. On the facts, it was not.

The Court emphasised the important factual differences, including the existence of a genuine, enforceable loan (rather than one expected never to be repaid) and the absence of any entitlement or expectation of remuneration of the relevant amount.

Pre-Part 7A context and HMRC overreach

A notable feature of the judgment is its treatment of the statutory context.

The Court explicitly recognised that the arrangements pre-dated the introduction of Part 7A. It observed that, had they been implemented later, a charge would likely have arisen under the disguised remuneration rules.

However, the Court cautioned strongly against allowing this to distort the analysis of earlier arrangements:

“It is of course right that HMRC should consider whether arrangements implemented before these changes fail under the pre-existing law. But, however proper HMRC’s motives are, caution is required to avoid a risk of over-reach, with consequential risks to legal certainty.”

The Court warned that focusing too closely on individual elements of a structure risks missing the broader legal character of the arrangement.

These observations are significant. They underline that the subsequent introduction of targeted anti-avoidance rules does not justify stretching earlier legislation beyond its proper scope.

Comment on Part 7A

Whilst the Court suggested that the arrangements “would” now be caught by Part 7A, it should be noted that legislation was not in issue and the Court had not been addressed on its proper construction and application. The tribunals have not yet considered how Part 7A applies to genuine loan arrangements.

While Part 7A provides a broad regime for taxing third-party arrangements, it is not inevitable that all genuine loan structures fall within its scope. Future cases involving genuine loans that do not seek to disguise or replace remuneration may raise questions as to the correct application of the Part 7A regime.

Outcome

The Court of Appeal dismissed HMRC’s appeal, confirming that neither the payment to the EBT nor the loan constituted earnings.