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the ftt’s findings of fact
the ftt’s findings of fact
In addition to extensive documentary evidence, the evidence considered by the FTT included witness statements and evidence from Mr Galpin, the managing director and sole shareholder of CHR, and Mr McSkimming and Mr Helliar, managing director and director respectively of A D Bly. The FTT also considered a joint statement of experts as to accounting issues relating to the arrangements, noting that the question of the appropriate accounting standard to apply was not an issue in the appeal: FTT[21].
The FTT concluded that Mr Helliar’s evidence was largely irrelevant to the periods in question: FTT[12]. As regards the other two witnesses, the FTT stated that they had been assisted by Charterhouse in writing their statements, and “passages in the two witness statements were strikingly similar”, concluding that “to a large extent, Charterhouse told both witnesses what to say and how to say it”: FTT[20].
The FTT made separate findings of fact in relation to each Appellant. Its findings in relation to A D Bly included the following:
The FTT was not satisfied that there was a separate meeting of the directors of A D Bly to discuss the remuneration packages of key individuals prior to a meeting between the company and Charterhouse to discuss the UURBS: FTT[27].
Tax was discussed at that meeting with Charterhouse.
The letter of engagement issued by Charterhouse to A D Bly following the meeting contained these provisions:
Warning Regarding Tax Planning
Any tax planning covered by this engagement letter may be considered to be aggressive tax planning by HM Revenue & Customs and as such they are very likely to raise enquiries into any transactions effected as part of the planning and may not accept the interpretation of any tax legislation that has been relied upon as part of the planning.
You should only proceed with such planning if you are prepared for such an enquiry and to pay any tax, national insurance and other duties that would be payable in the event that the planning failed to achieve its anticipated outcome. In the event that such liabilities become payable, at a date later than they would otherwise have been, then interest will be charged by HM Revenue & Customs in respect of the late paid amounts.
We shall assist you in establishing an unfunded unregistered retirement benefit scheme (an ‘UURBS’). However, we cannot advise on the suitability of an UURBS as a mechanism for providing pensions to employees.
Counsel will be instructed to advise in respect of the taxation consequences of the matters referred to in 2.1 above.
You will be relying on the advice given by Counsel.
…
We shall recommend and liaise with a remuneration consultant with a view to them producing an estimate of the overall level of rewards for specified employees including the provision that can be made for each employee who is to be rewarded by the Company by way of an UURBS.
Synergis Small Business Consulting (“Synergis”) was appointed to act “as remuneration consultant to [A D Bly] for the specific task of giving an opinion as to the level of pension provision that could be made, in [financial year ended 30 November 2012], for various directors”. Synergis agreed that the pension provision for that year should be £1,040,000, comprising 100% of A D Bly’s profits for the year.
There was no reference in the report produced by Synergis to any opinion as to the overall level of rewards for the directors. The report was expressly restricted to the “commercial suitability” of the pension benefits, and did not offer “financial, pension, investment or tax planning advice”.
Two days after the delivery of the Synergis report, on the last day of the company’s financial year, the directors of A D Bly had a meeting at which it was agreed that 100% of the projected pre-tax profits (now £1,300,000) would be used to provide the unfunded pension arrangements with the relevant directors. The rewards determined by the directors diverged in several respects from those recommended by Synergis: FTT[43].
On 14 November 2013 A D Bly resolved to enter into further unfunded pension arrangements for directors, with the pension provision being 80% of that year’s projected profits of £3,000,000. The board appointed FLB Accountants LLP (“FLB”) to review the remuneration packages of the directors including the proposed pension provisions. FLB limited the scope of its advice by similar wording to that adopted by Synergis.
On 28 November 2013 the directors resolved to enter into the 2013 agreements. The minutes of that meeting refer to projected pre-tax profits of £2.9 million, but the final accounts showed a pension provision of £4,435.180, being 80% of pre-tax profits of £5,543,975.
A D Bly subsequently paid pensions to three directors in accordance with the arrangements described above: FTT[50].
The FTT made findings of fact on similar issues in relation to CHR, with the material difference that prior to the periods under appeal CHR was found to have transferred its trade, employees and certain related assets and liabilities to a limited liability partnership, CHR (Travel) London LLP. The effect was – as the FTT found – that the principal activity of CHR became being a member of a trading limited liability partnership. CHR itself had no employees during the periods in question. Very broadly, the FTT’s findings followed a similar pattern to those made in relation to A D Bly, with reports again prepared by Synergis and FLB. In 2013, CHR made unfunded pension provisions equal to 80% of the company’s projected pre-tax profits for the year, and in 2014 equal to 100% of projected pre-tax profits, even though FLB’s report for 2014 had only recommended a provision equal to 80% of that figure. At the date of the FTT hearing, no pensions had been paid by CHR: FTT[51]-[76].