LM Ferro Ltd v Revenue & Customs [2013] UKFTT 463 (TC) (29 August 2013)

LM Ferro Ltd v Revenue & Customs [2013] UKFTT 463 (TC) (29 August 2013)

The Tribunal found that, viewed realistically and purposively, the arrangements amounted to a scheme to pay a bonus in money rather than securities. The award was excluded from the definition of 'securities' by s420(5)(b) ITEPA 2003 as 'money,' and thus Part 7 did not apply. The Regulation 80 determinations and s8 decisions were valid, and the bonus was taxable as employment income subject to PAYE and NICs.

Citation
[2013] UKFTT 463
Parties
Appellant: LM Ferro Limited; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
29 August 2013
Procedural Posture
Appeal (first Tier Tribunal Tax) / Final Judgment
Outcome
Appeal dismissed
Legal Topics
Income Tax, Corporation Tax, Employment Income, PAYE, National Insurance Contributions, Tax Avoidance Schemes, Restricted Securities, Interpretation of ITEPA 2003
Tax Law Employment Law Corporate Law Income Tax Corporation Tax Employment Income PAYE National Insurance Contributions +3 more

Case Brief

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Parties

LM Ferro Limited

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

Appeal (first Tier Tribunal Tax) / Final Judgment

Legal Issues

  1. 1 Whether the bonus paid to Mr Ferro was an award of restricted securities under Chapter 2 Part 7 ITEPA 2003 or excluded as 'money' under s420(5)(b) ITEPA 2003
  2. 2 Whether the scheme succeeded in avoiding income tax and NIC liability on the bonus payment
  3. 3 Whether Regulation 80 determinations and s8 decisions were valid

Ratio Decidendi

The Tribunal found that, viewed realistically and purposively, the arrangements amounted to a scheme to pay a bonus in money rather than securities. The award was excluded from the definition of 'securities' by s420(5)(b) ITEPA 2003 as 'money,' and thus Part 7 did not apply. The Regulation 80 determinations and s8 decisions were valid, and the bonus was taxable as employment income subject to PAYE and NICs.

Court Disposition

Appeal dismissed

Orders

  • Regulation 80 determinations and s8 decisions upheld
  • Bonus payment of £300,000 to Mr Ferro is taxable as employment income and subject to PAYE and Class 1 NICs