Unbelievable the fees paid per paras 77, 102, 119 & 175 for this garbage, worse than useless scheme: https://www.bailii.org/ew/cases/EWHC/Ch/2020/1054.html
What a mess! Although per paras 2, 3 & 172 the FTT has yet to determine if the obligation to pay the share subscription price avoids any IT/NIC, it is certain to fail as a scheme one way or another e.g. per paras 189, 253 & 254 that is enough to kill the scheme.
Clearly the taxpayer knows that and is why they are trying to unwind the scheme (as an unlawful distribution and a mistake*) per paras 18, 21, 30 & 222. In fact, you only have to read para 1 to know what the outcome of the FTT case will be. Interesting also that the ex-husband wanted to keep the (almost certainly now net of tax) money and so sided with HMRC and presumably this was an additional reason for wanting it all set aside (as the ex-husband may then have had to repay it to the company - but that claim was settled just before the trial per para 17, but his damaging witness statement was in evidence nonetheless in para 26). Unless it was dealt with in the settlement, if the company pays his PAYE there may be a dispute over recovering that from him (as he will get a credit for that at the company's expense and there are also potential s223 ITEPA 2003 issues there).
Para 223 supports my view re Toone being wrongly decided here: https://www.accountingweb.co.uk/any-answers/interesting-ebt-case-1
The judge seems to go awry in his analysis of illegal distributions in paras 290-292, since per HMRC's guidance they are void and held as constructive trustee by the recipient (who knows or has reasonable grounds to believe that a distribution or part of it is unlawful - as was contended here per para 266) and so are not taxable: https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm15205 . In para 291 he seems to think the company can be taxed on it as remuneration even if it is found to be an unlawful distribution (the same error as the judge in Toone).
Also, I love the way HMRC are happy to argue it's nothing to do with remuneration when it suits them. See: https://library.croneri.co.uk/cch_uk/bvc/2019-tc-07464
Overall, this taxpayer appears to have been either badly advised or reckless in pursing this rather hopeless looking (see para 281) and expensive rectification litigation (many of counsel's submissions for the taxpayer were of the straw clutching variety). Perhaps she should have instead settled with HMRC and then got rid of the unpaid call simply via a sfs x/c and solvent liquidation and then sue her advisers for damages** (see damning para 276). (I believe that's what the Root2 taxpayers are doing.)
* to avoid these consequences, whereby HMRC can effectively persue the shareholder for a bust company's tax: http://www.greenhalghkerr.com/articles/tax-avoidance-scheme-gives-rise-r...