Prevailing practice tightened in EBT case

The concept of prevailing practice was recast in more restrictive terms by when a first tier tribunal turned down an appeal by a company that claimed tax relief on contributions to an employee benefits trust.

The tribunal in Boyer Allen Investment Services v HMRC heard that the company had made payments of more than £27m to an employee trust for several years, and making deductions from its corporation tax due for those amounts.

In July 2005, however, HMRC decided that under s43 of the Finance Act 1989 the EBT payments were not deductible until what it saw as employee emoluments were paid out. Discovery assessments were raised for 2000 and 2001 amounting to nearly £11.5m in tax and accrued interest.

The point of prevailing practice is to prevent HMRC from recovering underpaid tax where tax relief was overclaimed (TMA 1970), explained Anne Fairpo in her 24 September podcast.

“Essentially what tribunal said was that just because HMRC believe a piece of legislation should be interpreted in one way, and practitioners believe the same, that doesn't mean that this is prevailing practice,” Fairpo explained.

Anne Fairpo tax podcast

 

Continued...

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Comments
carnmores's picture

judges making the law again

carnmores | | Permalink

bah humbug

chris.cpwtax.co.uk's picture

Discovery Assessment

chris.cpwtax.co.uk | | Permalink

Can anybody realistically explain to me how HMRC can justify a "Discovery" when the payment in question has been staring them in the face from the submitted accounts for several years ?

Here we go again

David Gordon FCCA | | Permalink

I had always thought that if suffcient information was provided in the accounts, such that HMRC would be able to raise a query thereon, but chose not to so do within statutory time limits. then the expense item stood as approved. This depended on the information being sufficient to clearly explain the nature of the payment. I beleive there are long standing appeal decisions on this. In this case the size of the numbers matter.

 

 

 

carnmores's picture

how can this be right

carnmores | | Permalink

“Essentially what tribunal said was that just because HMRC believe a piece of legislation should be interpreted in one way, and practitioners believe the same, that doesn't mean that this is prevailing practice,” 

 

what planet are these judges on - i note that they are taking legal advice (from whom) and thinking of taking the gov to court over the fact that they will have to make contributions to their pensions.

welcome to the real world m'luds take your head out of the clouds