An offshore tax avoidance scheme used by FTSE 100-listed investment management company Aberdeen Asset Management to pay its employees tax-free bonuses has been closed by Scotland's most senior court.
Aberdeen paid senior employees and directors over £31m free of income tax and National Insurance Contributions between 2000 and 2003 using an Employee Benefit Trust (EBT).
The Scottish Court of Session last week backed HM Revenue and Customs' (HMRC) argument that Pay As You Earn (PAYE) and National Insurance Contributions (NICs) should be paid on the bonuses, which were converted into shares under the complex scheme.
The PAYE and NICs at stake in the case totalled £7m.
This is the latest in a series of court rulings against businesses that have tried to avoid PAYE and NICs using schemes involving EBTs.
The scheme used by Aberdeen Asset Management was outlawed in 2003.
The Exchequer Secretary to the Treasury David Gauke, said:"The Government has made almost £1bn available to HMRC to tackle avoidance and evasion and to ensure that the minority who try to avoid their responsibilities pay the tax due.
"This scheme, like so many others, was a waste of time and money. The tribunal decision sends a clear message to anyone who is tempted to use avoidance schemes: HMRC will pursue you and you're likely to end up having to pay the tax due, interest and the promoter's fees as well."
HMRC Director General, Business Tax Jim Harra said:"This decision will be a big help when we come to argue other cases that are currently in the courts.
"We hope this success will encourage more companies to cut their losses and come forward to settle their EBT liabilities on the basis that this kind of avoidance scheme does not work."
An Aberdeen spokesperson said: ""We are disappointed that the Court's decision has gone against us, but we welcome the fact that we can now draw a line under this issue. All amounts assessed by HMRC have previously been paid and the decision has no further financial impact on the group."
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation