In Jones Bros Ruthin (Civil Engineering) Co Ltd and Britannia Hotels Ltd v HMRC [2022] TC08378, the First Tier Tribunal (FTT) ruled a remuneration scheme using a financial derivative product aimed to avoid PAYE and NICs did not work. The arrangement had no commercial purpose and the likely outcome was that the employees received a cash bonus.

  • The appellant companies implemented a marketed tax scheme which purported to avoid Income Tax under PAYE and National Insurance Contributions (NICs) using Contracts for Difference (CFD’s) under which:
    • The employee made a (minimal) upfront payment to the employer for a CFD.
    • Under that CFD, payments would be made by the employee to the employer if the employers’ profits were less than a specified figure.
    • Payments would be made by the employer to the employee if the future profits of the business were above a certain level.
  • HMRC issued Regulation 80 PAYE assessments on the basis that the payments received represented earnings.  The scheme was simply a device used to deliver monies in an uncommercial way to employees that purported to avoid Income Tax and NICs.
  • The Appellants appealed against these determinations.

The FTT found dismissed the appeals finding that:

  • There was no commercial objective to the Appellants’ arrangements save for the tax-saving element.
  • The arrangements were designed to have the characteristics of CFDs, but the terms were carefully crafted to operate such that the likely outcome was that the employees received a cash bonus.
  • While the legislation was satisfied in literal terms, when viewed purposively, the arrangements were not CFDs and did not, therefore, represent Employment-Related Securities as contended.
  • The substance of the payments under the contracts was that they represented employment earnings and should be subjected to Income Tax and NICs accordingly.


The CFDs in this case are not to be confused with CfDs. A government scheme, with the same name: Contracts for Difference (CfDs) is its main mechanism for supporting low-carbon electricity generation.

Useful guides on this topic

Spotlight 28: Employee Bonus Schemes: Contracts for difference
HMRC has issued Spotlight 28: Employee Bonus Schemes - Growth Securities Ownership Plan and other avoidance schemes based on contracts for difference.

Recovery of PAYE: Regulation 80 and 72 assessments for PAYE
When can HMRC assess an employer or an employee for unpaid Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs)? What is a regulation 80 determination? What is a regulation 72 determination? Who is assessed and what are the conditions?

Employment-Related Securities & Share Schemes
What are the tax consequences when a company gives shares to an employee or director? What are employment-related securities? What is best: shares or share options? How do you set up a share scheme?

External links

Jones Bros Ruthin (Civil Engineering) Co Ltd and Britannia Hotels Ltd v HMRC [2022] TC08378


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