Disguised remuneration rules apply to payments

The taxpayer was an insurance broker and subsidiary of another company which was wholly owned by three individuals each of whom was an employee of the taxpayer and two were directors. The taxpayer made contributions to a remuneration trust and those contributions were used to make loans to the three individuals. The company claimed corporation tax deductions for the contributions to the trust. It also said that no income tax or National Insurance charge arose on the loans.

The First-tier Tribunal found that the taxpayer had entered into a marketed scheme which involved a series of pre-ordained steps. A purpose of setting up the trust and making contributions was to secure a tax advantage. The judge did not accept the taxpayer’s alternative reasons. These included to provide a fighting fund to benefit customers and the business and because it had lost confidence in banks. Therefore irrespective...