In Dukeries Healthcare Ltd and Ors v Bay Trust International Ltd, HMRC and Ors [2021] EWHC 2086 (Ch), the High Court dismissed claims to set aside Remuneration Trust arrangements using the equitable doctrine of mistake. There was insufficient evidence of serious mistake and the claimants had accepted the risk the schemes would fail.

The claimant companies had entered into Baxendale Walker (BW) Remuneration Trust (RT) tax planning schemes.

“Using legal strategies successfully implemented over a decade, the company… can fund an incentives plan, under statutory protection, through a tax-free trust-based environment” and “such contributions are not subject to PAYE, since none of the contribution constitutes assessable income of any employee, or indeed specific receipt by any person. Similarly, such contributions are not liable to Employers Class 1 NICs."

The High Court dismissed the claims:

Comment

One of the claimants, Dukeries Healthcare, has a case pending with the First Tier Tribunal (FTT) which is stayed subject to the decision in the High Court. In that case, HMRC claim the contributions into the trust are not tax-deductible and are payments of earnings subject to PAYE and NICs. The decision in that case will be key for other users of this particular scheme. It is worth noting that in another recent case Marlborough DP Ltd v HMRC [2021] TC08246 the FTT held that loans funded by a remuneration trust were not earnings, or taxable under part 7A and were taxable as distributions. FTT decisions are not precedent however and it may be that HMRC appeal that case.

Useful guides on this topic

Rectification of Trustee mistakes
What happens when trustees make mistakes? Can the court rectify them? When will they agree to rectification?

Disguised remuneration loan charge
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?

Disguised remuneration 2020 settlement opportunity
What is HMRC's position on disguised remuneration loans where settlement was not reached by 30 September 2020? Can a settlement still be reached?

FAQs for Disguised Remuneration Settlements
Can I just repay my loans? Which is cheaper: the loan charge or settling? How much will it cost to settle? And many other FAQs.

External link

Dukeries Healthcare Ltd and Ors v Bay Trust International, HMRC and Ors [2021] EWHC 2086 (Ch)


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