DTE Financial Services had bought an interest in an overseas trust which in turn had paid a total of £121,800 into the bank accounts of three directors in the form of a contingent reversionary interest under a settlement.
DTE contended that the payment was a benefit in kind falling outside the scope of the legislation requiring the employer to account under the PAYE system.An earlier hearing had concentrated on one director, Mervyn MacDonald, who, in recognition of a year's work for DTE, had been paid £40,000 by a non-resident trustee company.
Lawyers for the company said in the High Court the transaction was genuine and could only be seen for what it was; namely the purchase of a reversionary interest under a trust and not subject to PAYE.But the judge, Justice Hart, upheld the inspector's earlier decision, that there had been a payment within section 203B of the Income and Corporation Taxes Act, which says that if any payment assessable for tax is made by an intermediary of the employer, the employer will be treated as making the payment.In this case payment had clearly been made by trustees holding property for people who included the employees and had therefore been made by an intermediary.
PricewaterhouseCoopers tax partner John Whiting said this case could have some general relevance, but it is more likely each tax avoidance scheme would have to be judged individually.
He said: 'A number of schemes have been tried and this one is just the great grandson of paying you in fine wines. That's long gone but people try more and more different things.'The decision in this case would not mean every other scheme would not work 'but the thing in deciding the next one is to see if you get different facts,' Whiting added.
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