Loans were taxable as employment income

HMRC decided the taxpayer used two contractor loan schemes to reduce his tax. The schemes supposedly worked by converting employment income into loans from an offshore trust and that these loans would not be taxable as employment income. The department raised discovery assessments to collect the tax it deemed was due.

The taxpayer appealed. This was on the basis first that they were invalid and were not served on him properly and second the loans were not taxable employment income. Further he had repaid at least some of the loans.

The First-tier Tribunal found as a fact that the taxpayer had participated in the loan schemes. Further it was clear from the evidence that the loans replaced the salary to which he was entitled for his employment services. He was therefore liable to income tax irrespective of whether it was intended that the loans...