Director’s responsibility to cover potential tax liability

The company a member of a group owned by a plc implemented a conditional share scheme promoted by a major accountancy firm. The scheme involved the creation of a special purpose vehicle (SPV) which was funded by an employee benefit trust (EBT) structure. Shares in the SPV were awarded to individual employees and dividends were paid on those shares. The intention was that the company obtained a tax deduction for the funding of the arrangement but that no PAYE or National Insurance liability arose and that the individuals were taxable at (the lower) dividend rates on what they received.

The company implemented the scheme regularly between 2001 and 2010. During this period HMRC made a number of settlement opportunities available to scheme users all of which were rejected by scheme users. Ligation in the PA Holdings case (which used a very similar scheme) resulted first in a...