In the case of R Toome and another v W Ross and another EWHC 2855 decided on 30th October, the court held that monies paid into an employee benefit trust where the company subsequently became insolvent amounted to unreasonable behaviour by the directors notwithstanding that the court had some “empathy” with the directors who they believed had been honest.
On the same day, in P D Allen and another v A M Bernard and others EWHC 2855, the court held that monies paid into an employee benefit trust where the company subsequently became insolvent did not amount to unreasonable behaviour by the directors.
Martin Redfern, who has been involved with such arrangements for clients and non-clients alike, noted that “the two decisions are in sharp contrast to one another yet the facts appear to very similar”.
In Toome Martin identifies the fact that the directors failed to take and act upon independent legal advice and that “this differentiated Toone from Allen where the directors took legal advice”.
In Allen the court trotted out the usual quote from the famous case Duke of Westminster (1936) stating that “everyman is entitled to order his affairs so that the tax attaching under the appropriate law is less than otherwise intended” whereas in Toone the court felt compelled to state that by withdrawing funds tax free the intention to do so was illegal.
As the headline states Spot the Difference; as Martin concludes “HMRC may well appeal the Allen judgement citing Toone and the taxpayer appeal the Toone judgement citing Allen”.
Watch this space!
In case of any questions please contact at Chris.Cummings@ase-global.com
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