Wired Orthodontics Limited & Ors v The Commissioners for HMRC
Decision date: 6 January 2023
Neutral citation: [2023] UKFTT 17 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
Wired Orthodontics facilitated a scheme where the company bought gold for two director-employees who immediately sold it, creating directors' loan credits while the company undertook to pay equivalent sums into an employee benefit trust. The Tribunal held the directors received money or money's worth of £300,000 (taxable "earnings" under s62 ITEPA), the company was liable for PAYE/NICs and s222 ITEPA applied, and the company’s £300,000 payments (and the £40,500 fee) were not deductible as wholly and exclusively for the trade. Applications to amend grounds or admit further evidence were refused.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
Where an employer provides a readily convertible asset that is immediately converted into cash-like value for the employee, that provision can constitute taxable "earnings" under s62 ITEPA even if accompanied by a contemporaneous obligation to pay an equivalent sum to a trust; and payments made in highly contrived arrangements designed to supply tax-free cash to participator-employees and secure a corporation tax deduction can fail the "wholly and exclusively" test under s54 CTA 2009 and be disallowed.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal suggested (obiter) that large implementation fees paid to related scheme providers may be characterised as remuneration for tax-advice/implementation rather than genuine trading commissions where evidence of commercial risk or market basis is lacking, and noted that GAAR procedural notices themselves do not create tax debt (jurisdiction derives from the underlying assessments), though it did not need to decide GAAR counteraction on the facts.