Taxpayer’s challenge to penalties fails

The company took part in a packed avoidance scheme under which it paid a fee to an ‘employment and recruitment services’ firm to provide it with recommendations for remunerating its employees. 

The firm recommended (as it appears to have done in every case) that the company set up an offshore employee benefit trust (EBT) and use the funds in that EBT to reward employees by way of loans. The company claimed a corporation tax deduction for the fee which it paid and no PAYE or National Insurance (NI) was operated on the loans.

It was accepted by the time the case came to the First-tier Tribunal that the scheme was ineffective: the substantive issue in the appeal was whether the company had been careless. This affected both the amount of any penalty and the assessing time limits.  

The tribunal found that Mrs Bray on behalf of the company (of which...