Loans received from EBT set up by offshore company

The taxpayer was a contractor employed by an offshore company. Until 2004 he supplied his services through his own personal service company but found the running of the company onerous. He therefore used intermediaries which suggested he enter employment with an offshore company. Ultimately the result was that the latter contributed to an employee benefit trust (EBT) the trustees of which then made interest-free loans to the contractor.

The appeal concerned discovery assessments raised because HMRC ruled that the loans were taxable. After deciding in favour of HMRC on the discovery issue the First-tier Tribunal also commented on HMRC’s alternative argument – that the taxpayer would be taxable under the transfer of assets abroad legislation (ITA 2007 s 714 et seq) in particular on the motive defence (ITTOIA 2005 s 737). The judge said it was the taxpayer’s defence that ‘his motive was purely...