Lynx Forecourt Limited v The Commissioners for HMRC
[2024] UKFTT 278 (TC)
M R Currell Limited v The Commissioners for HMRC
12 July 2023
[2023] UKFTT 613 (TC)
First-tier Tribunal
A company paid money to a trust, which then loaned it to the company's director. The tax court said this was really a way to pay the director without paying taxes, so the company has to pay taxes on the money.
Key Facts
- •£800,000 payment from M R Currell Limited (the company) to an employee benefit trust (EBT) in November 2010.
- •The EBT trustee lent the £800,000 to Mr Mark Currell (MC), a director and shareholder of the company.
- •HMRC determined income tax (£320,000) and NICs (£113,427.33) were due on the payment.
- •The company appealed, arguing the loan was a genuine transaction, not a disguised reward for MC's services.
- •The arrangements involved setting up the EBT, MC applying for a loan, a loan agreement, a share charge deed, a share sale agreement between MC and his wife, and the payment from the company to the EBT.
Legal Principles
Income tax on emoluments or earnings is due on money paid as a reward or remuneration for the exertions of the employee.
Rangers RFC 2012 plc v Advocate General for Scotland [2017] 1 WLR 2767 (Lord Hodge at paragraph 58)
Employment does not have to be the sole cause of a payment, but it must be a substantial cause to characterize it as one from employment.
Kuehne and Nagel Drinks Logistics Ltd v HMRC [2012] EWCA Civ 34
A genuine repayable loan can constitute a reward or benefit under section 62 ITEPA 2003.
This case's judgment
Outcomes
Appeal dismissed.
The Tribunal found the substantial reason for the company's payment to the EBT was to enable the loan to MC. The loan, though genuinely repayable, was considered a reward for MC's services, making the payment taxable earnings under section 62 ITEPA 2003.