Loan did not confer a taxable benefit

In 2010 the taxpayer – a company – made a payment of £800 000 to its employee benefit trust (EBT). The trust then loaned the whole sum to MC who was director and shareholder of the company. The loan was interest-free and repayable on demand after five years. MC used the loan to buy shares in the taxpayer from his wife who lent the proceeds to the taxpayer.

HMRC made determinations under Income Tax (PAYE) Regulations 2003 reg 80 charging PAYE and class 1 National Insurance on the payment by the company to the EBT. The First-tier Tribunal dismissed the taxpayer’s appeal. It appealed to the Upper Tribunal.

On the taxpayer’s assertion that the First-tier Tribunal had erred in law in concluding that the payment constituted taxable earnings the Upper Tribunal agreed that it had. The judge said the making of the loan was not a payment of...