- Taxation of contractor loans (Hoey v HMRC)
- What are the practical implications of this case?
- What was the background?
- What did the Upper Tribunal decide?
- Case details
Private Client analysis: In Hoey v HMRC, the Upper Tribunal (UT) considered an appeal in relation to the taxation of arrangements involving payments to trusts by an offshore employer of persons whose services it contracted to third parties in the UK. The trusts then made loans to the employees/contractors. The taxpayer had conceded that payments to the trust were employment income but argued that he benefited from a Pay As You Earn (PAYE) credit. The UT held that, although it considered that he should benefit from such a credit, this was not a matter it had jurisdiction to determine. An alternative basis of liability argued for by HMRC—that the taxpayer was liable under the transfer of assets abroad code by reference to income of the employer, was rejected, as there was no income of the person abroad. Although not a binding decision, this is an important statement of the proper analysis to be adopted in relation to taxation of contractor loans. Written by Rory Mullan QC, barrister at Old Square Tax Chambers and counsel for Mr Hoey.
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