Blatant tax avoidance

Two companies used a tax-planning scheme that involved the payment of remuneration by way of bonuses: an employee was awarded restricted shares in a newly incorporated special purpose vehicle (SPV) which was then liquidated and its assets distributed to the employee.

A question arose as to whether or not the sums were subject to income tax and National Insurance as employment income.

The First-tier Tribunal said the transactions viewed realistically had no commercial purpose.

The judge concluded that the only explanation for the creation of the SPV was to put in funds and withdraw them as soon as possible. It was a “blatant example of what the Upper Tribunal [in UBS AG and DD Group Services (UK) Ltd v CRC] called a ‘money in money out’ arrangement”.

The tribunal referred to the Ramsay principle saying the end result of the scheme under scrutiny was preordained and inevitable...