At the Court of Session in Edinburgh today (4 November 2015) HMRC succeeded in their appeal against the Tax Tribunal ruling in the “Rangers” case, with the Judges ruling that if income was derived from an employee’s services, in their capacity as an employee, it was an emolument or earnings and “thus assessable to income tax”.
Delivering the opinion of the court, Lord Drummond Young said it was “common sense” that income from employment should be subject to tax.
He stated: “If the law were otherwise, an employee could readily avoid tax by redirecting income to members of his family to meet outgoings that he would normally pay: for example to a trust for his wife… or to trustees to pay for his children’s education or the outgoings on the family home.
“The funds are ultimately derived as consideration for the employee’s services, and on that basis they are properly to be considered emoluments or earnings.
Whilst there is still the possibility of an appeal to the Supreme Court, the ruling is likely to put yet more fire in HMRC’s belly in its battle against Employee Benefit Trusts particularly, and tax avoidance generally. We shall follow developments with interest.
If either you or your clients are still in dispute with HMRC over participation in Employee Benefit Trusts or other tax-related products, please do feel free to contact Outhwaite Associates Ltd for a no-obligation conversation about how best to proceed.