Aberdeen Asset Management PLC v HMRC
| Jurisdiction | UK Non-devolved |
| Judge | , |
| Judgment Date | 25 October 2011 |
| Neutral Citation | [2012] UKUT 43 (TCC) |
| Respondent | HER MAJESTY’S REVENUE AND CUSTOMS |
| Appellant | The Chamber President, the Hon Mr Justice Warren Sitting in public in Edinburgh on 24 and 25 October 2011 Representation: Kevin Prosser QC and Rebecca Murray instructed by Ashurst LLP for the |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Appeal Number | FTC/94/2010 |
Income Tax; emoluments; tax avoidance scheme; transfer of shares; whether
a payment –No; whether shares a readily convertible asset – Yes; Income &
Corporation Taxes Act 1988 sections 1, 19, 131, 202A&B, 203, 203A, 203F,
The Income Tax (Employments) Regulations 1993 Regulation 2- appeal
dismissed
FTC/94/2010
[2012] UKUT 43 (TCC)
IN THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
BETWEEN
ABERDEEN ASSET MANAGEMENT PLC Appellant
-and-
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS Respondents
Tribunal:
The Chamber President, the Hon Mr Justice Warren
Sitting in public in Edinburgh on 24 and 25 October 2011
Representation:
Kevin Prosser QC and Rebecca Murray instructed by Ashurst LLP for the
Appellant
Julian Ghosh QC and Iain Artis, Advocate, instructed by the General Counsel and
Solicitor to HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2012
2
DECISION
The Appellant’s appeal is dismissed
REASONS
Introduction
1. The Appellant, Aberdeen Asset Management PLC (“AAM”), is an international
investment management group managing assets for both individuals and institutions. It
entered into a tax avoidance scheme known as the Discounted Options Scheme (“the
Scheme”) established to provide additional remuneration to a number of employees.
The Scheme was designed to avoid liability to account for income tax under the PAYE
system and for national insurance contributions under the relevant social security
regime. AAM was subject to a number of Notices of Determination in relation to
PAYE and NI. It appealed against those determinations, and decisions.
2. AAM’s appeal came before the First-tier Tribunal in June and July 2010. It was heard
by J Gordon Reid QC, FCI Arb and Ian Malcolm (“the Tribunal”) who released their
decision (“the Decision”) on 29 October 2010. They refused AAM’s appeal,
summarising their conclusions at [93] of the Decision in 11 sub-paragraphs. AAM now
appeals against certain aspects of the Decision. If successful on those aspects, AAM’s
appeal against the Notices of Determination in relation to PAYE succeeds. AAM does
not appeal the Tribunal’s conclusions in relation to NI.
3. Kevin Prosser QC and Rebecca Murray appear for AAM. Julian Ghosh QC and Iain
Artis appear for the Respondents (“HMRC”).
The Scheme
4. The essence of the Scheme can be found in [6] to [8] of the Decision:
a. AAM established an offshore Employee Benefits Trust (“EBT”) for its
employees, which was a discretionary trust with professional trustees from the Isle
of Man. The beneficiaries were senior employees or directors of AAM who were
3
to be rewarded with additional remuneration for past performance (an
“Employee”).
b. Substantial funds were transferred by AAM into the EBT.
c. An Isle of Man company (a “Company” - referred to by the Tribunal as a “money
box company”) with £2 share capital was created or acquired for each Employee
who, because of his good performance, was to be favoured. The directors of the
Company were professional administrators from Jersey or the Isle of Man from
the same organisation as the professional trustees.
d. The EBT subscribed for the two shares in the Company. One share was paid for
at par (£1) and the other at a very substantial premium which might range from
about £100,000 to nearly £2.9m (the Tribunal’s summary refers to a figure of
“over £1m” but the larger figures appears from the details given later in the
Decision).
e. At or about the same time, a Family Benefits Trust (“FBT”) was established by
the trustees of the EBT for each of the Employees; the beneficiaries were the
Employee and his immediate family with a charitable longstop. The trustee of the
FBT was a professional trustee again from the same organisation. The trust fund
of the FBT was a nominal £10 provided by the EBT.
f. The Company’s authorised share capital was increased by £10,000 and it then
granted to the FBT an option to subscribe for 10,000 ordinary shares in the
Company. The existence of the option was said by AAM to dilute the value of the
two original shares.
g. One or both shares in the Company were transferred to a nominee company for
behoof of the Employee.
h. The option would subsist usually for a year and would then lapse without exercise.
In practice, none of the early options, which were exercisable for 1 year, was
exercised. Later options, which were granted for 10 years, have not yet lapsed but
none has been exercised.
To continue reading
Request your trial
1 cases
-
Aberdeen Asset Management PLC v The Commissioners for HM Revenue and Customs
...sections 1, 19, 131, 202A&B, 203, 203A, 203F, The Income Tax (Employments) Regulations 1993 Regulation 2- appeal dismissed FTC/94/2010 [2012] UKUT 43 (TCC) IN THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER) BETWEEN ABERDEEN ASSET MANAGEMENT PLC Appellant -andTHE COMMISSIONERS FOR HER MAJESTY’......