The disguised remuneration tax avoidance schemes used by Rangers Football Club do not work, according to an unanimous decision in the Supreme Court.
In paragraph 39 of the Court’s decision, they set out the principle that employment income paid from an employer to a third party is still taxable as employment income.
The Court ruled in HMRC’s favour and agreed that Rangers should have deducted Income Tax and National Insurance contributions from payments they made to the tax avoidance scheme, which was an employee benefit trust (EBT).
HMRC’s view is that this principle applies to a wide range of disguised remuneration tax avoidance schemes, no matter what type of third party is used. This includes:
EBTs - including variants within these schemes where no loans are made from the EBT but instead the funds remain in, or are invested by, the trust disguised remuneration routed through employer-funded retirement benefit trusts a range of contractor loans schemes.The facts of each case will determine where the earnings point arises based on decided case law.
For more guidance on what this decision means, view Spotlight 41.
