The decision of the Supreme Court in favour of HMRC is not particularly surprising. Given the way that the EBT was set up the documentation and the communication to the footballers, my only surprise is that the taxpayer managed to win at the First Tier and Upper Tier tax tribunals.
Now that The Supreme Court has upheld the decision of the Court of Sessions, one should look at the judgement which will be very useful to HMRC in the future. Quoting the words of Lord Hodge, “The tax code is not a seamless garment. As a result, provisions imposing specific tax charges do not necessarily militate against the existence of a more general charge to tax which may have priority over and supersede or qualify the specific charge.”
What this means is that if the Courts believe that a payment or a benefit is earnings then they will allow HMRC to tax it as such even if they cannot find a specific taxing element under the tax code. This follows and is fairly similar in its effect to the PA Holdings case where the justices at the court of appeal decided that the dividend should be taxed as earnings. Practitioners should be aware that HMRC now has a totemic decision allowing it to strike down remuneration planning that it disapproves of much more easily. This will have consequences well beyond the settlement of EBTs.
Jeremy Mindell is giving the employment tax update at the CIOT conference in Warwick 8th-10th of September 2017 which includes a review of the forthcoming changes to termination payments.
