Company pays the tax

Aberdeen Asset Management (AAM) entered into an avoidance scheme involving payments into an employee benefit trust to pay bonuses to certain employees.

The First-tier Tribunal held that the scheme failed. AAM accepted the decision but the issue remained as to who was liable to pay the outstanding tax on the awards made.

The company agreed it was responsible for the National Insurance but argued the tax should be collected from the employees. HMRC said AAM should pay.

The Upper Tribunal (Tax and Chancery Chamber) said the purpose of the scheme was pay a bonus to the employee. Rather than paying cash it provided the employee with the rights of a shareholder possessing all the shares in a cash-rich debt-free company.

Viewed realistically the employee controlled the company and he could in practice take money out of the business whenever he wanted to do so.

The...