No inaccuracy implementing employee trust scheme

The taxpayer took part in an employee benefit trust tax arrangement recommended to it by a CTS Ltd. It claimed a corporation tax deduction for the payment it made into the scheme but HMRC decided the arrangements did not work.

In March 2017 the taxpayer and HMRC agreed a settlement covering all PAYE National Insurance corporation tax and inheritance tax liabilities arising from the arrangement. HMRC also imposed a penalty in relation to PAYE against which the taxpayer appealed.

HMRC said the taxpayer knew the scheme was not being implemented properly and therefore knew the P35 was inaccurate. The taxpayer denied this saying it had taken advice from ‘reputable and qualified advisers’ and its reasonable understanding was that the return was correct when filed.

The First-tier Tribunal found that the taxpayer had set up the arrangement in line with the advice it had received. Therefore the taxpayer...