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GAAR advisory panel gives opinion on gold bullion EBT scheme

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The general anti-abuse rule (GAAR) advisory panel has given its opinion, on an anonymised basis, that the entering into and carrying out of a scheme to reward key employees using the purchase and sale of gold bullion, with a future obligation to repay the cost of the gold to an employee benefit trust, involved taking abnormal and contrived steps, and was not a reasonable course of action in relation to the relevant tax provisions.

The GAAR advisory panel is designed to prevent abusive tax arrangements which fall foul of a double reasonableness test, that is, ‘arrangements which cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions’. This is the first opinion issued by the panel since its creation in 2013.

The scheme involved a purchase of gold for key employees, which the company funded. The employees immediately sold the gold, settling the company’s liability to pay the third-party gold supplier in return for a director’s loan account credit in their favour. A long-term obligation was created under which the employees were required in the future to pay to the trustees of the EBT an amount at least equal to the purchase price of the gold (plus indexation).

The scheme was intended to achieve a corporation tax deduction for the company, despite the provisions in CTA 2009 on unpaid remuneration and benefits, and avoid an income tax and NICs charge on the employees under both the ‘money’s worth’ and disguised remuneration rules. In relation to the disguised remuneration rules, the scheme relied on the absence of an explicit ‘no connection with a tax avoidance arrangement’ condition.

The panel regarded the steps in this case involving gold as ‘abnormal and contrived’, seeing no reason for the arrangement other than for tax purposes. Had cash been used instead of gold, the panel’s view was that neither the employees, nor the company, would have been in a substantially different economic or commercial position, except for the saving of fees in relation to the purchase and sale of the gold.


Issue: 1366
Categories: News