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Ground 3: Section 222
Ground 3: Section 222
Mr Thornhill explained that if the FTT was correct that earnings arose when the gold was received, the Applicants accepted that section 222 would apply. However, if there were no earnings at all, or if the earnings arose when credits were made to the directors’ loan accounts, then permission to appeal was sought to challenge the conclusion that section 222 would apply.
Since I have refused permission to appeal in relation to the earnings issue, Ground 3 relates only to whether the earnings arose when the gold was received.
Mr Thornhill argued that the use of gold in the scheme was all part of a plan to take advantage of the disguised remuneration provisions, and since that plan had failed “the complexities of the gold were irrelevant and unnecessary at the end of the day”. He also repeated his argument that the directors never had an entitlement to the gold, as they paid market price for it, and it was “pre-ordained” that they would sell it and pay the purchase price, the Company having no funds to pay for the gold. The directors could only ever receive cash, via the loan account credits.
I consider that in view of the FTT’s findings of fact, which are not challenged, this ground is unarguable. At FTT[193(2)], the FTT stated that “the Directors received £300,000 worth of gold. The documents were at pains to show that the beneficial ownership of the gold vested in the Directors”. At FTT[195] the FTT found as follows:
We are clear that the provision of the gold to the Directors was the provision of money or money’s worth to them. The Directors were able to convert their momentary ownership of the gold into loan account credits which they subsequently drew as cash. There was no contractual requirement as between the Company and the Directors that when they became entitled to the gold they should use the proceeds of sale of it to satisfy Asset Hound’s invoice. Instead, the Directors received the gold and the documents sought to make clear that they had beneficial ownership of it even if in fact that ownership was momentary because they had already decided to sell it.
At FTT[203], the FTT agreed with HMRC’s submission that the rules dealing with readily convertible assets were “precisely aimed at covering situations in which there is, in substance, a payment of earnings in cash”. I agree.
Ground 3 is unarguable and I refuse permission to appeal for this ground.