Avoidance scheme fails

The appellant established an offshore employee benefit trust (EBT). The beneficiaries were senior employees and directors of the company who were to be receive bonuses.

Money was paid into the trust and an Isle of Man company (known as a money box company) was created for each employee. The EBT subscribed for two shares in the money box company: one share at par the other ranging from £100 000 to more than £1 million.

At the same time a family benefits trust (FBT) was established by the trustees of the EBT for each employee. The beneficiaries of these were the employee and the employee’s immediate family.

The FBT was £10 provided by the EBT. The company’s authorised share capital was increased by £10 000 and then granted an option to the FBT to subscribe for 10 000 ordinary shares in the company. One or both...