Court of Appeal confirms that Part 7A ITEPA applies to loans made via a remuneration trust scheme
The Court of Appeal has released an important decision in the context of remuneration trusts and the scope of Part 7A ITEPA. The Court upheld the Upper Tribunal’s decision that sums contributed to an offshore remuneration trust and loaned to the sole director under a remuneration trust arrangement were taxable as disguised remuneration as they were ‘in connection with’ the employment. Critically, the Court of Appeal confirmed that s.554A(1)(c) required connection not causation, such that the employment did not need to form part of the reason for the payment. Here, there was a sufficient connection between the loans and the employment.
The Court also held that the contributions to the trust by the company were not deductible for corporation tax purposes as they were not incurred wholly and exclusively for the purposes of the company’s trade. The intended tax avoidance benefit was an end in itself, as the sole purpose was to extract the profits from the company in a form which did not attract tax and to make tax-free loans to the director.
Sarah Black acted for HMRC, led by Julian Ghosh KC (One Essex Court) alongside Barbara Belgrano (Pump Court Tax Chambers) and Colm Kelly (Devereux Chambers).
The decision can be found here Marlborough DP Ltd v HMRC [2025] EWCA Civ 796
