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The taxpayer company set up a funded unapproved retirement benefit scheme for its director, M, who was the sole member. The company transferred treasury stock into the fund.
HMRC decided the company was liable to Class 1 National Insurance on the contribution, which constituted earnings of the employee.
The company appealed to the First-tier Tribunal, which decided that, because this was a lead case for various similar appeals, the case should be heard by the presidents of the First-tier Tribunal and the Upper Tribunal (Tax and Chancery Chamber).
The Upper Tribunal said the critical question was whether the transfers of gilts into the scheme were earnings paid for the benefit of the employee. Looking at the words ‘for the benefit of’ in Social Security Contributions and Benefits Act 1992, s 6, the tribunal said it did not apply to all payments made for the benefit of the employee. A transfer of gilts or cash made to the trustees of the retirement fund did not fall within ‘earnings paid to or for the benefit of an earner’.
The scheme did not have the effect of passing a beneficial interest in the gilts to M. He had a right to ensure the trustees administered the fund properly, but he had not had a beneficial interest in any of the assets held in it.
The taxpayer company’s appeal was allowed.
