HMRC has avoided making it a hat trick of defeats after judges finally upheld their appeal following a taxation investigation into a football club.
HMRC maintained Rangers broke tax rules in the use of Employee Benefit Trusts (EBTs) that, between 2001 and 2010, gave millions of pounds of tax-free loans to players and other staff.
HMRC said they were taxable salaries, but lost its appeals at two tax tribunals.
Now judges have upheld the appeal, saying that income derived from an employee’s services, in their capacity as an employee, amounted to earnings and therefore, subject to tax.
The case forms part of an HMRC crackdown which has, among others, Scottish football in its sights. The judges’ decision does not affect the current owners at Ibrox and is in relation to Murray Group companies including the liquidated RFC 2012.
Tax experts estimate that EBTs were used by around 5,000 British companies, principally as a reward for high-earning talent in management or sport. The ruling is now expected to galvanise HMRC into launching more taxation investigations targeted at those who behaved as Rangers.
Backing HMRC, the judges’ finding was as follows: “We are of opinion that the sums received by the trustee of the Principal Trust, and in due course by the trustees of the sub-trusts, amounted to a mere redirection of income and thus constituted emoluments or earnings of the employee in question.”
Meanwhile, the Financial Times has reported that tax is becoming harder to avoid. It suggests accelerated payment notices, which cannot be appealed, are behind the crackdown’s success. It adds that the position of HMRC on disputed shelter schemes is being backed up by the courts, which are ruling consistently in its favour.
Taxation investigations are also the focus of the international community as the year draws to a close. A G20 meeting in Turkey at the end of November sees world leaders working on plans to target tax avoidance.
Organisations for Economic Co-operation and Development (OECD) estimates that governments could be missing out on as much as £158m in revenue as a result of corporations and individuals finding ways to minimise tax.
More than 90 countries have signed up to the organisation’s working group aimed at fighting ‘profit shifting’. EU officials have made tax transparency one of the top items on their agenda for the Antalya summit and are pushing for an international deal on cross-border avoidance.
At Salhan Accountants, we know that seeking early advice is crucial for those who are the subject of a taxation investigation – it is the best way towards positive outcomes.
Our specialists provide expert advice to demystify the situation and also clarify the process, including the options available. We can also assist in mitigating outcomes and presenting a robust defence when tax affairs are in order.
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