In HMRC v NCL Investments Ltd and other [2020] EWCA Civ 663 (21 May) employees of the taxpayer companies were granted share options from an EBT set up by the parent company. The Court of Appeal held that debits were recognised in the accounts for the share options and were also allowed for tax purposes even though HMRC considered those debits were not expenses incurred wholly and exclusively for the purposes of the trade.
The taxpayer companies were wholly-owned subsidiaries of Smith & Williamson Holdings Ltd (SW) and employed staff who they made available to other group companies in return for a fee. SW established an employee benefit trust which granted options to staff employed by the taxpayer companies to acquire shares in SW.
When options were granted to the employees the subsidiary companies would recognise in their accounts a capital contribution received from SW equal to the...
