UK: HMRC wins case on loans from Employee Benefit Trust

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On 6 July 2017 the Supreme Court ruled in favour of HMRC in a case involving payments from an employee benefit trust. Rangers Football Club (RFC) made payments to players and officials through an Employee Benefit Trust in the form of loans. This meant that the club could avoid liability to income tax and National Insurance contributions (NICs) in relation to the payments.

The First Tier Tribunal had decided in October 2012 that the loans should be regarded as payments of remuneration to the players and officials and the club should therefore have paid the NICs and income tax due through PAYE. That decision was upheld in the Upper Tribunal in July 2014. The Supreme Court unanimously dismissed the appeal by RFC and upheld the previous rulings.

HMRC noted that the decision has wide-ranging implications for other tax avoidance cases and emphasised that it will pursue any avoidance schemes that have consequences that were not intended by Parliament when the legislation was approved.

HMRC now intend to send follower notices to other businesses that used the same or a similar scheme. Those businesses will be required to pay the tax due based on the Supreme Court decision.


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