Tax advantageous deal

The company established a qualifying employee share ownership trust (QUEST) to provide incentives for its employees. The appellant director of the company paid a substantial contribution to the trust and sold it a portion of his shares in the company.

HMRC argued that the real reason for the QUEST’s establishment and the sale of the appellant’s shares to it was to obtain a tax advantage rather than to benefit employees.

On 31 July 2007 they issued an assessment under TA 1988 s 703(3) to counteract the advantage.

The appellant claimed that the personal tax implications of the creation of the QUEST were not of interest although as a result of the share transfer he did make a considerable tax saving.

The tribunal reviewed the evidence. It accepted that the taxpayer’s tax position was not his priority but said it was...