FTTTx Regulation 80, PAYE Regulations – Section 8, Social Security Contributions (Transfer of Functions, etc) Act 1999 – whether sums paid into a share scheme were earnings of the staff for whom they were paid – whether the shares purchased as part of the scheme were restricted securities within the meaning of Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 – whether the share scheme was within the scope of that Chapter
‘The aim was at first that there should be a complete offset between the loss to an employee if the trigger event occurred with the result communicated to senior management that there would be no reduction in value in the payout to the employee. He or she would receive the same whether or not the trigger event occurred. At some point someone thought a deliberate near miss was better than an exact hit in terms of offsetting the loss. As the trigger event did not occur, this was not tested … [T]he reality was that the scheme as a whole was carefully designed so that employees could not suffer any significant loss if the trigger event was realised. The reality of the risk was that an employee stood about a 10% chance of losing 0.8% of the bonus amount to be weighed against the opportunity to remove a 41% tax charge.’ and ‘The effect was that, at the close of the relevant period, ESIP Ltd would either have shares unaffected by the trigger event, or shares affected by the trigger event plus the benefits from the options. The scheme was originally so constructed that the values of the beneficial interests of individuals in the shares would have been the same under either of those two outcomes. This was then altered to create a small ‘loss’. The effect of the trigger event was the reduction in the value of the [shares] by a predetermined amount. The options purchased were of such a value that the sums received under the options if the trigger event occurred totalled slightly less than the loss in the value of the shares, again by a predetermined amount. Both figures were artificial in the sense that neither was determined by, or could be influenced by, any event outside the control of those establishing the scheme, or could alter once the shares and options were purchased. UBS as employer and the individual recipients as employees knew from the start of the scheme that the employees, as shareholders, would receive the money paid in by UBS from one or both of the parallel elements a few weeks later save, in the unlikely occurrence of the trigger event, to a deliberately determined and insignificant extent.’
[2010] UKFTT 366 (TC)
Bailii
Social Security Contributions (Transfer of Functions, etc) Act 1999 8, Income Tax (Earnings and Pensions) Act 2003
England and Wales
Cited by:
At FTTTx – UBS AG v HM Revenue and Customs UTTC 17-Sep-2012
UTTC Income Tax and NICs: scheme to deliver bonuses in form of shares avoiding income tax and NIC. S18(1) ITEPA Rule 2 – whether employee became ‘entitled to payment’ when amount of bonus determined. Ch 2 Part 7 . .
At FTTTx – UBS Ag and Another v Revenue and Customs SC 9-Mar-2016
UBS AG devised an employee bonus scheme to take advantage of the provisions of Chapter 2 of the 2003 Act, with the sole purpose other than tax avoidance, and such consequential advantages as would flow from tax avoidance. Several pre-ordained steps . .
Lists of cited by and citing cases may be incomplete.
Income Tax
Updated: 20 January 2022; Ref: scu.567523