[2025] UKUT 00278 (TCC)

The company tax return for the period 1 January 2012 to 31 December 2012 ticked, on the first page, the box entitled “Disclosure of tax avoidance schemes”; and a further box indicating that supplementary pages were provided for those schemes. The relevant supplementary page then provided two SRNs (one of which was for scheme 549), stating that the expected advantage had arisen in relation to the accounting period ending 31 December 2012.

The company financial statements for the accounting period ending 31 December 2012 identified Mr O’Connor as the sole director of the company during that period. Note 2 to those financial statements contained the following statement under the heading “Directors’ emoluments”:

“The Company, in order to motivate and incentivise its officers and employees, has made contributions to a previously established employer financed retirement benefit scheme for the benefit of the Company’s officers, employees and their wider families, The Fluid System Technologies (Scotland) Ltd 2011 EFRBS (‘the scheme’).

Contributions were made to the scheme during the accounting period which created value in that scheme. The amount of such value which is held on terms which are discretionary is £1,980,050. Because no earmarking has yet taken place in respect of this amount, it is not considered that this amount can be regarded as directors’ remuneration and, therefore, it has been excluded from the overall figure above.”

Note 3, headed “Operating (loss)/profit, then included a figure of £2m representing “Employer Financed Retirement Benefit Scheme Contribution”.

The corporation tax computation for the period 1 January 2012 to 31 December 2012 included at note 5 a table entitled “Directors’ remuneration”, where the only entry was for Mr O’Connor, with a sum of £5,549. The same corporation tax computation contained at note 7 the following statement:

“Employer Financed Retirement Benefit Scheme

During the accounting period the Company made contributions of value equalling £2,000,000, constituting, in its opinion, the provision of qualifying benefits as defined by s. 1292 CTA 2009, under The Fluid System Technologies (Scotland) Ltd 2011 EFRBS (“the scheme”), as outlined in the accounts accompanying this return. £1,000,000 of the above contributions were made by way of payments to employees subject to their covenants to pay the amounts in future to a person chosen by the trustees of The Fluid System Technologies (Scotland) Ltd 2011 EFRBS. In our view, this does not constitute a loan and, accordingly, no form CT600A in respect of these amounts is attached to the form CT600. The remaining £1,000,000 of the contributions were made by the company transferring a covenant to the Scheme. The covenant requires the Company to pay an amount equal to £1,000,000 in ten years’ time with commercial interest accruing in the interim. By way of subsequent agreement between the parties, certain employees agreed to pay amounts equalling £1,000,000 to the Scheme on the conditions that the Scheme agreed to pay equal amounts to the Company. The employees did this in return for the company crediting their current accounts equalling £1,000,000. The Company, already owing £1,000,000 to the Scheme, offset the amount promised by the Scheme of £1,000,000 against the amount it owed to the Scheme of £1,000,000.