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Tax tribunal stops director bonus scheme

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26th Jul 2013
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PAYE and NICs should have been paid on bonuses given to directors through companies which were specially set up just to be liquidated and pay out the cash, a tax tribunal has ruled. 

The decision by the first-tier tribunal (Tower Radio Ltd and Total Property Support Services Ltd v Revenue and Customs, TCO2784) has protected £22m in PAYE and NI, HMRC said.

Tower Radio Ltd and Total Property Support Services Ltd were lead cases at the tribunal.

The tribunal’s decision is relevant to 104 other companies which used the same tax avoidance scheme to try to pay bonuses without any PAYE  or NICs, according to the Revenue.

The businesses set up subsidiary companies as special purpose vehicles (SPVs) funded with surplus cash.

The directors were then awarded restricted shares in the SPVs which were then liquidated and the cash paid out to the directors as distributions in respect of their shares.

This scheme was promoted by Barnes Roffe and used in tax years 2003/4 and 2004/5, said HMRC.

The tribunal judge ruled that PAYE and NICs must be paid on the money received by the directors. 

Exchequer Secretary David Gauke said: “This scheme was designed specifically to avoid paying tax and national insurance; the ruling is another important win for HMRC in its work to ensure the right amount of tax is paid by everyone. This is a clear result and should act as a warning to others who try to manipulate the system."

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By GuestXXX
17th Mar 2015 15:57

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