In Alway Sheet Metal Ltd, Praze Consultants Ltd, JC McCahill Ltd v HMRC [2017] TC05686 company contributions to an EBT were disallowed; they had a duality of purpose.
- The companies had all decided to create employee benefit trusts.
- Payments were made by the companies into discretionary trusts for the benefit of employees and their families.
- Once funded the EBTs could be used to defer PAYE and NICs.
- The set-up involved the creation of offshore trusts and extensive professional advice.
- The taxpayers argued that the payments were to the benefit of the staff and allowable.
- HMRC challenged this.
The tribunal found that at least part of the objective was to provide the EBTs with funds to be used by the directors, the expenditure was not wholly and exclusively incurred.
Comment
This case follows the decision of the Upper Tribunal in the Scotts Atlantic case which had a similar set of circumstances. One of the issues with tax avoidance schemes/strategies is that expenditure may fail under the wholly and exclusively rule and so fall at the first hurdle, see Wholly and Exclusively...toolkit.
It is possible that we may see more cases brought on this basis in connection with future challenges by HMRC to Self employed disguised remuneration schemes such as remuneration trusts.
Link
Alway Sheet Metal Ltd, Praze Consultants Ltd, JC McCahill Ltd v HMRC [2017] TC05686
