PSC's face NI charge on divis

[Jessica@WhiteFieldTax]

, but it does give HMRC an extra building block upon which to broaden attacks.

If this is now case law, IR35 actually becomes irrelevant to a degree. If HMRC choose you and the court agrees, you pay up and that's it, no need for an IR35 investigation.

A small building block, at the margin.

The fact that HMRC have taken the case to tribunal and won suggests they had the tools - a mechanism to challenge at tribunal anyway.

But all this does is give them case law in a narrow set of similar facts - diverting employment income for non proprietorial employees to dividends. It means very little to 99% of companies.

[tractor]

...

If this is now case law, IR35 actually becomes irrelevant to a degree. If HMRC choose you and the court agrees, you pay up and that's it, no need for an IR35 investigation.

[centurian]

10:13 - What does the panel reckon??

15:13 - That was some difficult reading

Looks like it....


Without actually reading it in full, but digesting the commentary, I'm getting the sense that this is not a sudden seismic shift - and doesn't directly apply to IR35, but it does give HMRC an extra building block upon which to broaden attacks.

[LisaContractorUmbrella]

So, some sort of precedent is set, but not really a clear pointer to the future (in this case, dividend treatment) for the rest of us. Have to say, it really pi55es my chips when case law decisions are reached half-heartedly on matters which affect the livelihood of many others. Stuff like this should be on the statute books, where at least there is a better chance of clarity going forward, and less chance of reinterpreting previous (case law) decisions in new cases.

Couldn't agree more - the fallout from this could be huge but there is no basis for it within the statute books

[Swamp Thing]

That was some difficult reading but it would seem that this case has set a precedent as the judgement is not based on any pre-existing case law or legislation. It seems that the court decided that dividends could be viewed as such but could also, and at the same time, be viewed as remuneration from employment and that the form of a payment i.e. a dividend should not be focused on as much as the "character of the receipt in the hands of the recipient". A strengthener for IR35 I think but not sure of the significance otherwise

So, some sort of precedent is set, but not really a clear pointer to the future (in this case, dividend treatment) for the rest of us. Have to say, it really pi55es my chips when case law decisions are reached half-heartedly on matters which affect the livelihood of many others. Stuff like this should be on the statute books, where at least there is a better chance of clarity going forward, and less chance of reinterpreting previous (case law) decisions in new cases.

[Jessica@WhiteFieldTax]

I'm not overly vexed and briefed my clients to that end today.

It was extreme avoidance; my partner was enrolled in a similar scheme as staff at a major financial services co, a decade ago, and they caved in early on. PA Holdings hung on, but the writing was on the wall.

I haven't seen anything to suggest properly constituted dividend arrangements are at risk for proprietotial controlled businesses.

[LisaContractorUmbrella]

That was some difficult reading but it would seem that this case has set a precedent as the judgement is not based on any pre-existing case law or legislation. It seems that the court decided that dividends could be viewed as such but could also, and at the same time, be viewed as remuneration from employment and that the form of a payment i.e. a dividend should not be focused on as much as the "character of the receipt in the hands of the recipient". A strengthener for IR35 I think but not sure of the significance otherwise

[Swamp Thing]

I doubt Hector would see it that way.

A more relevant difference is that there is no intermediary "rewarding" the discretionary payments, unless they take the view that MyCo is the intermediary of course. . .

I would think that if a ltd is properly formed (as most of us should do), i.e. shareholders nominated and a consideration paid for allotted shares, then it is a different thing from PA vs HMRC - where it seems there was no attempt to initially create share capital and have the employees pay a consideration for it.

[northernladuk]

I doubt Hector would see it that way.

A more relevant difference is that there is no intermediary "rewarding" the discretionary payments, unless they take the view that MyCo is the intermediary of course. . .

Not sure about that but it is so grey who knows. From the wording what they are doing fails one of the HMRC avoidance points. I forget the wording but it's the one where you set something up where there is no business need and exists to avoid tax only. They want bonus, pay them a bonus. OK. The want bonus but an artificial situaion is created to do it by avoiding tax responsibilities. Not ok.

I need to read it before going any further in to it though. Can't be as simple as the first paragraph implies.

[Goatfell]

Isn't the key to this in the first two sentences...



Isn't that a bit of a blatent move to avoid some responsibilities so was on thin ice from there on in. I need to read the rest of it to be honest as I would like to see how it might affect us but bearing in mind we are not changing the method of distributing the money to reduce liabilities I am hoping this is particular to this case.....

I doubt Hector would see it that way.

A more relevant difference is that there is no intermediary "rewarding" the discretionary payments, unless they take the view that MyCo is the intermediary of course. . .

[northernladuk]

Isn't the key to this in the first two sentences...

PA Holdings Ltd (PA) wished to pay their employees discretionary annual bonuses. It adopted arrangements whereby the employees who would have been paid bonuses were awarded shares and received dividends.

Isn't that a bit of a blatent move to avoid some responsibilities so was on thin ice from there on in. I need to read the rest of it to be honest as I would like to see how it might affect us but bearing in mind we are not changing the method of distributing the money to reduce liabilities I am hoping this is particular to this case.....

[NotAllThere]

Case is here: HM Revenue and Customs v PA Holdings Ltd [2011] EWCA Civ 1414 (30 November 2011)

[eek]

From CUK home page Limited companies face NIC charge on dividends :: Contractor UK

What does the panel reckon??

Read A scheme too far sees dividends taxed as earnings :: Contractor UK and you can see the problem. Taking the mickey seems to spring to mind.

[LisaContractorUmbrella]

From CUK home page Limited companies face NIC charge on dividends :: Contractor UK

What does the panel reckon??