Loans were taxable as earnings

The taxpayer a dental practice (MDPL) wholly owned by Dr Thomas operated a marketed tax avoidance scheme involving contributions to a remuneration trust. These which were broadly equal to MDPL’s annual profits were then loaned to Dr Thomas. There was no dispute that the sole purpose of the scheme was to extract MDPL’s profits in a form that did not attract a tax liability but enabled MDPL to obtain a tax deduction for the relevant sums in computing the profits of its dental trade.

HMRC issued corporation tax closure notices and discovery assessments PAYE determinations and National Insurance decisions against which MDPL appealed.

The First-tier Tribunal held that the loans were not taxable as earnings as they were not made by dint of Dr Thomas’s employment; indeed had it not been for the arrangements they would have been paid as dividends....