Taxing Matters

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On the day when Charles Green’s appeal was kicked into touch, there are other taxing matters coming down the pike that should persuade the EBT recipients to pause for thought.  The Supreme Court is taking a dim view on tax avoidance strategies. The BDO appeal, if accepted, will face an important legal precedent.

Deuutsche Bank Group Services (UK) Ltd v HMRC and HMRC v United Bank of Switzerland AG [2014] EWCA Civ 452.

In early 2004, UBS and DB each devised and instigated similar schemes that were designed to avoid income tax and National Insurance (NI) contributions  on bonuses provided to their employees with a combined total of £182m. The schemes operated by giving employees bonuses in the form of “restricted securities” in an offshore special purchase vehicle which would be redeemed for cash at a later date. However, HMRC determined that tax and NI was payable on the value of the restricted securities awarded to the employees as earnings from their employment.
Supreme Court Justice, Lord Reed, when handing down judgement stated:

‘The most sophisticated attempts of the Houdini taxpayer to escape from the manacles of tax include elements which have been inserted with no commercial rationale beyond tax avoidance. Tax avoidance schemes that lack commercial purpose will not be protected even if they meet the strict letter of the tax legislation.In our society, a great deal of intellectual effort is devoted to tax avoidance.’

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