Tax professionals continue to digest the impact of the Court of Session’s decision in the Murray Group Holdings case. The court applied a redirection of earnings principle to treat payments made by the employer to employee benefit trusts (EBTs) as taxable earnings. Contrary to some suggestions, the decision does not introduce a new principle but is instead a classic application of a 1904 case. Furthermore, the disguised remuneration rules may not apply to an EBT resulting from the redirection principle. Under that principle, the employee is the settlor, not the employer. HMRC is unlikely to agree, however, so some caution is required about future developments.
Tax professionals continue to digest the impact of the Court of Session’s decision in the Murray Group Holdings case. The court applied a redirection of earnings principle to treat payments made by the employer to employee benefit trusts (EBTs) as taxable earnings. Contrary to some suggestions, the decision does not introduce a new principle but is instead a classic application of a 1904 case. Furthermore, the disguised remuneration rules may not apply to an EBT resulting from the redirection principle. Under that principle, the employee is the settlor, not the employer. HMRC is unlikely to agree, however, so some caution is required about future developments.