Payments were redirected

A group of companies including Rangers Football Club created an employees’ remuneration trust for the benefit of employees and their families. The companies paid money into the trust directing the trustees to set up a subtrust for each employee. A loan facility was also made available to employees. The point in dispute was whether the payments into the trust and loan accounts should be taxed as emoluments (TA 1988 s 19(1)) or earnings (ITEPA 2003 s 62).

HMRC argued that the payments were made by the employer to the employees and were therefore subject to tax and National Insurance. They issued assessments against which the taxpayers appealed.

The First-tier Tribunal allowed the taxpayers’ appeal. HMRC were granted permission to appeal to the Court of Session.

Lord Drummond Young who delivered the opinion of the Court of Session said the...