THE STRANGE CASE OF PA HOLDINGS

摘要

The latest twist in the case of PA Holdings Limited [2011] EWCA CIV 1414 has once again caused much Sherlock-style contemplation. This is a complex case about old law but the Court of Appeal boiled it down to quite a simple point as it found in favour of HMRC that is relevant to many owner-managed businesses. The underlying planning was designed so that payments could be made to employees which would be taxable as dividend income in their hands (with no PAYE or National Insurance Contribution liabilities), but the company would also receive a corporation tax deduction for the expense as an employment cost. Unsurprisingly HMRC challenged the planning, with the case being heard by the First Tier and Upper Tribunals.