Tax Avoidance Case HMRC Wins

In a recent tax case a dentist has lost out to HMRC following a decision by the Cout of Appeal.

The dentist traded through a Limited company and on the advice of a solicior, for which a 10% commission was paid, a scheme was set up to avoid taxation.

The scheme basically entailed money being paid from the dentists’s compny into a trust and then being paid to the dentist as a loan. The arguements used was that as a loan , there was no tax payable.

Unfortunately for the dentist, the scheme did not work and as well as having paid fees to the solicitor, who set up the scheme, the dentist has ended up in a much worse situation than if the scheme had not been set up.

The Court of Appeal decided that the money (the loan) should have been taxed as a salary (hence subject to PAYE and NIC) and that as the payment had been set up with the intention of  paying a loans to the dentist, the  payment would not be allowed against corporation tax for the company.