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Scotts Atlantic Management Ltd v HMRC

In Scotts Atlantic Management Ltd v HMRC (and related appeals) (TC02704 – 23 May) two associated companies which promoted film financing schemes claimed deductions for substantial payments to employee benefit trusts in favour of their controlling directors. HMRC rejected the claims considering that in reality the payments were distributions of profits rather than expenses incurred for the purpose of earning profits. The companies appealed. The FTT reviewed the evidence in detail and dismissed the appeals.

Judge Nowlan found that the companies had engaged in a ‘highly contrived scheme’ in the hope of ‘achieving the precisely opposite corporation tax treatment for the EBT contributions than the result intended by Parliament’. He observed that ‘the deliberate and all-pervading objective of achieving a corporation tax deduction makes it impossible to treat the corporation tax result sought for the contributions as the “ordinary intended or realistically expected outcome”...

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