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A manufacturing business paid bonuses to the husband and wife controlling-shareholders and directors via a specially formed company. The aim was to avoid having to pay tax and National Insurance.
The circumstances were similar to those in PA Holdings v CRC [2012] STC 582.
Shortly before the Court of Appeal hearing in PA Holdings, the taxpayer company accepted that the payments were remuneration to the husband and wife directors.
However, the payments were also dividends, so the appellent company argued that, under TA 1988, s 20(2), a distribution that was chargeable under Schedule F would not be chargeable under any other provision of the tax acts.
The tribunal said s 20(2) was irrelevant because there was essentially no dividend.
The taxpayer company’s appeal was dismissed.
