Is a loan really a loan?

The highly publicised demise of Glasgow Rangers included significant debate about whether the “loans” made to players from EBTs set up by the club prior to its administration are taxable as remuneration. HMRC thought so and sought to assess the club for income tax and National Insurance on those loans.

The case has been heard at the First Tier Tribunal and on a 2-1 majority, the judges decided that the loans are indeed loans and not remuneration. This is welcome news to taxpayers who have taken loans from EBTs, although of course, HMRC may yet decide to appeal the decision. It is worth noting though that this does increase the tally to 3……..being the number of times HMRC has now lost the argument that loans are taxable as earnings (here, Sempra and Dextra).

Here’s an extract from the Tribunal decision:

“The majority view reflects the argument that the controversial monies received by the employees were not paid to them as their absolute entitlement. The legal effect of the trust/loan structure is sufficient to preclude this. Thus the payments are loans, not earnings, and so are recoverable from the employee or his estate.”

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