Directors: Payment as consultants didn’t save tax
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Para 16 is odd in that HMRC should have raised the usual quasi sham/mislabling argument (i.e. that they were dressed up as self-employed but were really paid in their capacity as employees/de facto directors) that has been mentioned here several times recently as an easy way to defeat this kind of unrealistic dressing up of payments etc. or simply applied normal self-employment/employment tax case law.
Since that argument wasn't deployed the judge (in para 24) seems to have been forced to use the "realistic" ratio of Arrowtown to do down this planning, which is not really appropriate on the facts of this case (that phrase in Arrowtown was in the context of share rights with no realistic right to income and there is nothing analogous here).
The "realistic" ratio in Arrowtown cannot be a panacea to do down any tax avoidance scheme based on a realistic view of what a judge thinks the real deal was, otherwise Julian Ghosh QC would have argued the Rangers' loans were not loans but were really salary but he abandoned that argument of course as it was hopeless (many here nevertheless seem to believe that that was how HMRC won in Rangers).
Also, the corollary of Judge Gething (who incidentally is a she not a he) being right about how widely the "realistic" ratio of Arrowtown can be applied would be that IR35 cases could simply be decided on an Arrowtown realistic view by the judge of the facts (compared to and essentially ignoring the actual contract terms), which cannot be right.
That such Arrowtown interpretation is wrong in going too far re Ramsay (i.e. simply disregarding non-commercial steps etc.) is confirmed at paras 104 & 186 here:
http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j11066/TC...
And see also para 136 re parties being allowed to contract as they like to potentially save tax.
Anther example of a judge misapplying Ramsay to his view of the "realistic" facts/deal (instead of correctly applying quasi sham/mislabling case law) is here:
http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j10000/TC0...
The limitations of Ramsay re tax avoidance are explained quite well here:
http://www.bailii.org/ew/cases/EWCA/Civ/2019/364.html
Also, this case shows that transactions between connected persons may be on terms that are not overtly commercial but it does not follow that they are not real and are not capable of giving rise to real economic consequences.
http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j10990/TC...