Gold bullion constituted earnings

The company WO established an employee benefits trust (EBT) and undertook to contribute £300 000 worth of gold bullion within the next ten years. The directors immediately sold the bullion they had been awarded and used the proceeds to discharge the taxpayer’s payment obligation. This created corresponding credits in the directors’ loan accounts which they later drew on when the company had profits to make cash payments to them. In addition the directors agreed to assume WO’s obligation to pay £300 000 into the trust.

HMRC referred the arrangements to the general anti-abuse rule advisory panel which concluded that the arrangements were ‘abnormal and contrived’. It concluded the most likely comparable commercial transaction would have been the company funding the EBT followed by a loan from the EBT to the directors. This would have given rise to a charge to income tax under ITEPA 2003 ...