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HMRC snubbed by Court of Appeal overturning previous ruling

The Court of Appeal just sent Her Majesty’s Revenue & Customs to the woodshed, overturning a previous ruling that categorised a scheme as tax avoidance.

Thst’s right – judges decided against HMRC’s insistence that a scheme designed to save company directors millions of pounds in taxes was legitimate and not an example of tax avoidance or tax evasion. The upper tribunal said that essentially it’s permissible to pay employee bonuses in shares instead of cash in order to reduce their tax liabilities.

This is actually quite a big deal when it comes to how far the taxman can reach in rooting out tax dodgers. The decision sets a precedent as far as what kinds of schemes HMRC can go after and what kinds of activities are considered to rise to the level of artificial and unacceptable amounts of tax avoidance. That’s not my language by the way – as far as I’m concerned, any level of tax avoidance is unacceptable, whether it’s committed by a multinational company or a humble contractor – but that’s how the courts are looking at it.

Now the initial ruling – that the scheme was indeed tax avoidance – had been a major feather in the cap for the tax authority when it worked its way through the courts initially in 2013. Treasury minister David Gauke was positively chuffed to bits at the time, recounting how the ruling was a major victory for HMRC and that it stood as a warning for any other firms that sought to pull the wool over the taxman’s eyes; now, I’m sure Mr Gauke was unavailable for comment as he was busy eating crow at the time.

For what it’s worth, the upper tribunal judges did acknowledge that the result of the scheme was rather unattractive since it did indeed reduce tax liabilities. However, there was no way around the fact that shares were restricted securities and couldn’t be considered when it comes to national insurance or income tax. It’s a bitter pill to swallow, but you can’t alter the laws as they’re written – and there’s only so much room for interpretation as well.  Maybe next time they shouldn’t be written with these massive loopholes in mind – that might solve the problem of having too many rich bastards slip through the cracks, eh?

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